The FCA has recently completed its review on how PEPs, including Members of Parliament, public servants, and their relatives and close associates (RCAs), are handled by financial services.
According to FullCircl, the review, which was delayed by the UK’s general election in June, revealed significant areas needing improvement in the current approach to domestic PEPs.
In response to these findings, the FCA is initiating a consultation to update the guidelines on PEPs, suggesting that UK-based PEPs might be considered as lower-risk. However, financial institutions are urged to refine their processes immediately, rather than waiting for the new guidelines to be officially published in October 2024.
The review highlighted several deficiencies in the way firms manage their PEP-related procedures. Many lack effective continuous monitoring systems to ensure the relevance and appropriateness of a PEP’s classification after they leave office. Others fall short in their risk assessment methodologies, often not taking all relevant risk factors and individual circumstances into account.
Additionally, the collection of data by some firms is either excessive or disproportionate, and their communication lacks the necessary clarity and detail. Moreover, there is a need for enhanced staff training to ensure consistency in understanding and applying PEP procedures across the board.
Financial services are now expected to take several immediate actions. They must review and revise their PEP policies, procedures, and controls to align with the forthcoming guidance and ensure a risk-based and proportionate approach in dealing with PEPs and RCAs. Clear and effective communication compliant with Consumer Duty regulations is also essential, as is comprehensive staff training on the new policies and procedures.
The necessity of adopting a risk-based approach in managing domestic PEPs is crucial. By doing so, financial institutions can ensure their treatment of PEPs is fair, proportionate, and aligned with broader risk management strategies and compliance requirements, including Anti-Money Laundering (AML) and Consumer Duty regulations.
FullCircl’s Anti-Money Laundering (AML) software presents a solution for financial services aiming to stay ahead of PEP regulations. The software enables firms to differentiate between foreign and domestic PEPs, including a range of other categorisations, through automated risk assessments facilitated by a single API integration. This capability extends to various public figures, allowing for more efficient information processing without excessive data collection.
Additionally, FullCircl’s software incorporates global enforcement lists, regulatory actions, adverse media screenings, and sanctions lists, ensuring compliance and effective communication with PEPs and RCAs within the bounds of AML and Consumer Duty regulations.
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