The Financial Conduct Authority (FCA) has published Finalised Guidance on the treatment of politically exposed persons (PEPs) for anti-money laundering purposes.  

The Guidance follows the publication of a review last year (on which we commented here) which noted that there is room for improvement within all firms as regards their treatment of PEPs and led to the FCA launching a consultation on proposed changes to its guidance. 

The FCA has now considered the feedback from that consultation and has confirmed that it will proceed with making a number of changes to its guidance, including the following: 

• It is made explicitly clear that non-executive board members of central government boards in the UK should not be treated as PEPs unless they already meet the definition of a PEP in respect of another capacity (for example as a member of the House of Lords); 

• More flexibility has been introduced to the process of approving or signing off PEP relationships. As the FCA explains, “this allows firms to have processes to allocate sign off to anyone who has sufficient knowledge of the firm’s money laundering, terrorist financing and proliferation financing risk exposure, and has sufficient authority to take decisions affecting its risk exposure. Firms should clearly document who these staff are and train them on the requirements for approval”.  

• It is confirmed that, as a starting point, firms should treat domestic PEPs, their family members, and their close associates, as lower risk than foreign PEPs “unless enhanced risk factors are present”. 

The Finalised Guidance can be read in full here.