The FCA has published Guidance Consultation 17/2: Treatment of politically exposed persons under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (GC17/2).

GC17/2 follows the draft Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (the new Regulations), that HM Treasury published earlier this week.

GC17/2 is applicable to any firm that is subject to FCA supervision for anti-money laundering purposes. This includes, but is not limited to: banks, building societies, wealth management firms, e-money institutions and investment managers.

Regulation 35 of the new Regulations obliges firms within scope to have appropriate risk-management systems and procedures to identify when their customer (or the beneficial owner of a customer) is a politically exposed person (PEP) and to manage the enhanced risks arising from having a relationship with that customer. Business relationships with the family and known close associates of a PEP are also subject to greater scrutiny. The draft guidance in GC17/2 discusses this further.

The FCA also states in GC17/2 that in meeting its obligations under the new Regulations and the guidance (when finalised), the regulator expects firms to do so in a proportionate manner. The FCA’s view is that there should be relatively few cases where it is necessary to decline business relationships solely because of anti-money laundering requirements and, in relation to the guidance, this should only happen where PEPs pose a high money laundering risk. The draft guidance also discusses how firms may differentiate between PEPs that represent a lower risk and those that represent a higher risk of money laundering.

The draft guidance should be read in conjunction with guidance on PEPs produced by the Joint Money Laundering Steering Group and guidelines issued by the Joint European Supervisory Authorities.

The deadline for comments on GC17/2 is 26 June 2017.

View GC17/2: Treatment of politically exposed persons the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, 16 March 2017