The treatment of politically exposed persons for anti-money laundering purposes

Finalised Guidance 17/6, July 2017

The FCA has finalised its guidance on how firms should approach politically exposed persons (PEPs), their families and known close associates. The guidance is issued under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and the FCA considers that it will satisfy the requirement for the FCA to issue guidance under section 333U of FSMA, when that provision comes into force.

The guidance is detailed in a number of respects, and should generally be helpful to firms in determining what procedures are appropriate in particular cases. It should also be helpful to individuals, in that the guidance sets out instances where firms ought not to treat a person as a PEP (e.g. because the office they hold is too junior), or ought to treat a PEP as posing a lower risk. The guidance also reiterates the FCA's position that firms are not expected to "de-risk" by refusing to have PEPs as customers, simply because they are PEPs

The FCA has produced detailed considerations as to: who a PEP is; who the family members of a PEP are; who the known close associates of a PEP might be; risk factors pointing to a PEP posing either a lower or higher risk; and steps that the firm might consider taking depending on the level of risk posed by a PEP. The guidance also contains useful information as to the level of sign-off firms should obtain in respect of high risk and low risk PEPs and how this interacts with the Senior Managers Regime.

It is clear from all this guidance, however, that firms will have to consider the detail of each case in order to determine how to proceed and document this carefully. The FCA has also since produced further draft guidance (in Consultation Paper 17/39) in relation to the Financial Crime Annual Return (REP-CRIM), including guidance to the effect that firms need only report in relation to PEPs (including their family and known close associates) whom they identify as high risk. The FCA says that this means, in practice, that firms will not need to make reports in relation to UK PEPs.

Proposed guidance on a sourcebook for professional body supervisors on anti-money laundering supervision

Guidance Consultation 17/7, July 2017

In March 2017, the government announced that it planned to introduce the Office for Professional Body AML Supervision (OPBAS), to be hosted by the FCA. As a result, in July 2017, the FCA launched a consultation process, part of which relates to the introduction of a "sourcebook for professional body supervisors", setting out guidance on how professional body supervisors should carry out their anti-money laundering supervision work.

The draft sourcebook (at Appendix 1 to the Guidance Consultation) includes the following expectations of professional body supervisors:

  • that they allocate responsibility within the organisation for supervision of AML;
  • that there is adequate management information in relation to the supervision of AML;
  • that they allocate their resources as regards supervision on a risk-based approach (maintaining a risk profile for each member) and support their members in doing so;
  • suggestions as to how ongoing supervision should be undertaken, such suggestions indicating that the burden of supervision is likely to be relatively heavy for professional body supervisors; and
  • specific guidance on information sharing.

Responses to the consultation have been lukewarm – both the Law Society and the Bar Council have been critical of a lack of clarity as to how the relationship between OPBAS and professional body supervisors will actually work, and it is true that the FCA's proposed sourcebook is far more focused on its expectations of professional body supervisors than on the practicalities of OPBAS's role.

The consultation process closed in late October 2017, and it remains to be seen what the FCA makes of responses it receives.