On 16 March 2017, the FCA published a guidance consultation on the treatment of politically exposed persons (PEPs) under the proposed

• Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (GC17/2).

Click Here To See FCA – guidance consultation:  http://bit.ly/2nMfNTm

Background:

HM Treasury published the draft regulations for consultation on 15 March 2017 as part of its work to transpose the Fourth Money Laundering Directive ((EU) 2015/849) (MLD4).

Among other things, MLD4 expands the PEP definition to include those holding a politically exposed position in the UK.

The FCA’s proposed guidance, set out in section 2 of GC17/2, is intended to give firms certainty on its expectations for how they treat the varying risks posed by PEPs, whether;

• they are based in the UK,
• another EU member state, or
• in a country outside the EU.

In particular, the proposed guidance clarifies who should be considered;

• a PEP,
• a family member of a PEP, or
• a known associate of a PEP.

It also clarifies the steps that firms should take when dealing with higher or lower risk PEPs.

The FCA expects firms to take a proportionate approach to meeting their money laundering obligations.

The FCA explains that the proposed guidance has been prepared based on its understanding of the risks and experience of cases where firms have applied enhanced due diligence (EDD) measures that were not commensurate with the risks posed by the particular PEP in question.

In the proposed guidance, the FCA states that it should be read in conjunction with guidance on PEPs produced by;

• the Joint Money Laundering Steering Group (JMLSG):  http://bit.ly/1GX2dFg

and

• the European Supervisory Authorities (ESAs -ESMA, EBA and EIOPA)

Comments can be made on the draft guidance in GC17/2 until 18 April 2017.

The FCA advises that it will consider feedback and issue a response, together with the final version of the guidance, before 26 June 2016, which is the MLD4 transposition date.

This is the date that HM Treasury has advised the proposed regulations will come into force and is the date the FCA advises that the final guidance has to be in place.

The FCA advises that HM Treasury has proposed, in the draft regulations, to make changes to the FCA’s obligation to provide guidance. Its proposed guidance in GC17/2 already covers much of the new obligation. However, the FCA intends to work with HM Treasury during the consultation period to “further refine” the guidance in line with this requirement, and with feedback from the industry and consumers.

The FCA will keep the final guidance under review, including taking into account complaints to the Financial Ombudsman Service (FOS) and feedback from consumers and firms. If the FCA identifies that the guidance is not meeting its aims, it will consult on amendments.

The FCA is required to publish the guidance under section 333U of the Financial Services and Markets Act 2000 (FSMA). This section of FSMA was introduced by section 30 of the Bank of England and Financial Services Act 2016.