Navigating PEP Compliance: FCA’s Proposed Amendments and Their Impact on Financial Institutions

Navigating PEP Compliance: FCA’s Proposed Amendments and Their Impact on Financial Institutions

The FCA recently reviewed their guidance on the treatment of Politically Exposed persons (PEPs). Firms can use this guidance as an approach to meeting their legislative requirements that are set out in the regulations. As a result, proposed amendments to this guidance have been shared for consultation to help facilitate effective compliance.

Proposed amendments

👉 Non-Executive Board Members (NEBMs) of civil service departments As part of the review, it was noted that some firms were treating NEBMs as PEPs. The proposed amendment clarifies that NEBMs roles, in the UK context, shouldn’t be treated as PEPs.

👉 PEP relationship signoffs It is a regulatory requirement that all PEP relationships are signed off by senior management. Currently, this is at minimum the Money Laundering Reporting Officer (MLRO) with higher level signoff potentially occurring for higher-risk relationships.

👉Reflect updates to Regulations Early in 2024, the UK government updated regulations to require domestic PEPs risk assessment stat at a lower risk point than foreign PEPs. Guidance will be updated to reflect this legislative change.

👉 Minor changes Further non-substantive changes have been made to update the guidance.

Clarifying who is considered a PEP and allowing for greater independence of the MLRO through expanding the scope of signoffs will help ensure seamless compliance experiences for both customers and firms.

We feel the amendments are a step in the right direction, whilst further clarity could be provided in ensuring firms appropriately manage the EDD requirements for domestic and foreign PEPs.

At Qkvin, we are excited to see substantive changes proposed based on reviews that seek to clarify this guidance to assist firms in their compliance journeys.

Configurable policies and workflows, such as Qkvin, ensure immediate integration of such changes to guidance, providing confidence in your FinCrime compliance journeys.

We look forward to the outcome and what the industry has to say.