On 7 July 2025, the Financial Conduct Authority (FCA) published Finalised Guidance 25/3: The treatment of politically exposed persons for anti-money laundering purposes (FG25/3).

Background

The FCA first produced guidance in July 2017 (FG17/6) for firms to apply a proportionate approach when dealing with politically exposed persons (PEPs).

On 18 July 2024, the FCA published the results of its multi-firm review on the treatment of PEPs and launched a consultation (GC24/4) on proposed changes to its guidance on the subject.

In GC24/4, the FCA proposed certain changes to its guidance on the treatment of PEPs, including changes to:

  • Reflect the new legal starting point that UK PEPs should be treated as lower risk.
  • Make clear that non-executive board members of civil service departments should not be treated as PEPs solely for that reason.
  • Give greater flexibility in who can approve or sign off PEP relationships within firms.

The deadline for responses to GC24/4 was 18 October 2024.

FG25/3

In chapter 2 of FG25/3 the FCA summarises the feedback it received to GC24/4 and sets out the finalised guidance at Annex 1.

When summarising the feedback the FCA explains that it has reflected on how firms can be given the greatest flexibility to implement senior manager sign off for PEP relationships. It adds that its revised approach links directly back to the definition of senior management in the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the Regulations) and this allows firms to have processes to allocate sign off to anyone who has sufficient knowledge of the firm’s money laundering, terrorist financing and proliferation financing risk exposure, and has sufficient authority, to take decisions affecting its risk exposure. The FCA states that firms should clearly document who these staff are and train them on the requirements for approval.

The FCA has also clarified how it expects Money Laundering Reporting Officers to oversee the operation of PEPs controls and that they need to monitor how onboarding and ongoing monitoring controls operate in line with the Regulations, FG25/3 and the Consumer Duty.

FG25/3 should be read in conjunction with the FCA’s multi-firm review of the treatment of PEPs mentioned above as it provides examples of good and poor practice by firms in following the guidance (as originally published in July 2017) and the Regulations (as they were in force in July 2024).