Following the launch of the FCA’s forthcoming review of how financial services companies in the UK treat PEPs, Claire Rees, Client Manager at Jade ThirdEye considers how firms might approach this review. 

The FCA review will look at how firms risk assess UK PEPs, their families and close associates and how enhanced due diligence and ongoing monitoring are applied in line with the identified risk.    

The FCA has stated it will consider how firms are: 

• applying the definition of PEPs to individuals 

• conducting proportionate risk assessments of UK PEPs, their family members and known close associates 

• applying enhanced due diligence and ongoing monitoring proportionately and in line with risk 

• deciding to reject or close accounts for PEPs, their family members and known close associates 

• effectively communicating with their PEP customers 

• keeping their PEP controls under review to ensure they remain appropriate 

Many firms will be using watchlist screening software to identify UK PEPs, their families and close associates.  However, there are a few key considerations: 

• Are you confident that your current software and processes are identifying PEPs, not just at onboarding but throughout your relationship?  

• Does your existing software and process ensure existing customers are continually monitored to flag changes in risk profile in line with the risk set out in your policies and procedures? 

• How are customers monitored and risk profiles adjusted on an ongoing basis to avoid rules being applied and individuals being unnecessarily excluded from products or services? 

• Does your software and process ensure there is a full audit trail, so regular reviews and decisions are logged and easily accessible to provide evidence when required? 

The FCA’s Guidance FG17/6: The treatment of politically exposed persons for anti-money laundering purposes (fca.org.uk) provides clarity on how firms should apply the definitions of a PEP in the MLRs in a UK context.  The FCA has stressed that it is important that they are implemented proportionately and don’t create unnecessary barriers for public servants and their families.   

A report of the review is expected by the end of June 2024 and the FCA has stated it will take prompt action if any significant deficiencies are identified. 

Claire Rees is a Client Manager at Jade ThirdEye. Claire has over 21 year's experience working in Risk Management roles in financial services, 17 years of which were spent specialising in Financial Crime Prevention in a number of senior roles including most recently as Head of Fraud and AML with a mortgage lender and service provider.