Money Laundering – Politically Exposed Persons
Of Relevance to:
All regulated firms
Draft UK Regulations transposing 4MLD into national law were published on 15 March 2017.
The concept of Politically Exposed Persons (“PEPs”) and the need to apply Enhanced Due Diligence continues under the Fourth Money Laundering Directive (“4MLD”), although the distinction between a domestic PEP and a foreign PEP will be removed – see Regulatory Roundup 80.
The FCA has published consultative Guidance GC17/02 on the treatment of Politically Exposed Persons under 4MLD.
GC17/02 reminds us that Money Laundering and Transfer of Funds (Information on the Payer) Regulations 2017 (“UK Regulations”) Regulation 35 requires ‘relevant persons’ (a term which will capture firms authorised under FSMA) to have in place appropriate risk-management systems and procedures to determine whether a customer (or the beneficial owner of a customer) is a PEP or a ‘family member’ or a ‘known close associate’ of a PEP (please see Regulation 35(12) for definitions). This is in addition to the obligation under UK Regulation 18 for firms to identify and assess the risks of money laundering and terrorist financing to which it may be subject (and which must be made available to its supervisory authorities on request).
Paragraph 2.17 of the consultative Guidance provides the FCA’s view on indicators that a PEP poses a lower risk e.g. a PEP operating in the UK (higher risk indicators are addressed in paragraph 2.18). It ends with suggested measures that firms may take in lower-risk and higher-risk situations.
The consultation ends 18 April 2017.
As a reminder 4MLD must be applied in Member States by 26 June 2017.