FCA has published its finalised guidance on the treatment of PEPs for AML purposes. It received 43 responses to its consultation on the guidance, all but one of which was in favour of guidance being issued, but many of which raised significant comments. FCA has responded to the comments and made some changes to clarify its guidance. Points addressed (or that remain unchanged include):
- some respondents were concerned about the focus on UK PEPs of the guidance, saying it made it hard for them to apply the same principles to foreign PEPs. FCA notes the specific Government intention that only a few office holders in the UK are to be treated as PEPs at all and that, because of the levels of scrutiny their appointments attract, they, their family members and close associates can be subject to the lowest degree of due diligence. The guidance now clarifies its application to UK PEPs while allowing firms to continue to interpret the definition according to the risks they assess ;
- stating that family members should include siblings and that firms should be able to apply the definition to wider family where their risk-based assessment suggests a risk;
- clarifying that one factor alone should not affect the risk determination and that firms should consider all relevant factors when assessing whether a PEP, family member or known close associate is higher or lower risk;
- a new chapter that sets out firms’ obligations under the MLRs and how FCA expects it to assess and document PEP risk;
- not changing, but clarifying the position in respect of application of EDD in lower risk situations and derisking.
Finally, FCA has confirmed Treasury will not be endorsing the guidance, but reminds firms the MLR allow courts to take into account any guidance issued by FCA. FCA considers that its issue meets its duty under FSMA s333U.