FCA launches review of PEPs: Newgate Compliance offers support & guidance

Newgate Compliance, Ocorian’s subsidiary compliance consultancy service, is closely following the Financial Conduct Authority's (FCA) review of Politically Exposed Persons (PEPs).

The FCA's review aims to assess how financial services companies handle PEPs and manage the associated risks. As the regulatory landscape evolves, Newgate Compliance is committed to helping you navigate it through expert support and guidance. This article explores the key areas of the FCA's review and highlights how Newgate Compliance can assist in navigating the challenges posed by PEPs.

Understanding PEPs & the FCA's review

PEPs are individuals who, due to their prominent positions or influence, are more vulnerable to being involved in bribery or corruption. They can include people in government roles, organisations, institutions, known close associates, and immediate family members. PEPs are generally considered high-risk clients by international lawmakers and transparency groups.

In July 2023, the FCA outlined the key areas it will examine in its review of how financial services companies deal with PEPs. These areas include the definition of PEPs, risk assessment processes, enhanced due diligence, account management, effective communication, and continuous review of PEP controls. The FCA aims to ensure that firms apply proportionate and effective systems and controls to mitigate the financial crime risks associated with PEPs.

Best practices & self-assessment

To effectively manage the risks associated with PEPs, firms should conduct business-wide risk assessments that cover a wide range of factors, including products and services, jurisdictions, customer types, transaction complexity, and distribution channels. These risk assessments should determine the level of risk associated with individual relationships and guide the appropriate level of due diligence.

Regular review of both business-wide and individual risk assessments is crucial to ensure they remain current. Firms should seek to understand the financial crime risks they face, identify new or emerging risks, and systematically record and update risk assessments. Newgate Compliance can assist firms in conducting comprehensive risk assessments and implementing best practices to manage PEP-related risks.

Case study: The Nigel Farage vs Coutts Bank

The recent case involving Nigel Farage and Coutts Bank has sparked a wider debate within the financial sector regarding the management and treatment of PEPs. Farage claimed that his bank account closure was due to him being classified as a PEP and his political views not aligning with the bank's values. This case highlights the need for fairness and transparency in the PEP regime.

Accurate PEP identification and management are vital to protect financial institutions from corruption and money laundering risks. The FCA's review emphasises the importance of risk management, enhanced due diligence, PEP screening tools, and ongoing monitoring to clearly identify PEPs. Newgate Compliance can provide support and guidance to firms in implementing these measures effectively.

How can Newgate Compliance help?

Newgate Compliance is committed to helping navigate the challenges posed by PEPs. We offer a range of services via The Gateway including training courses, monitoring questionnaires, AML and wider financial crime risk assessments.

Additionally, Newgate Compliance can assist in incorporating PEP-related policies and procedures into compliance manuals.

As the FCA launches its review of PEPs, Newgate Compliance stands ready to support regulated firms and financial institutions in effectively managing the associated risks. By offering guidance, training, and comprehensive risk assessments, Newgate Compliance aims to ensure that firms comply with regulatory requirements while striking the right balance between risk management and protecting customers' rights. With Newgate Compliance as a trusted partner, firms can navigate the evolving regulatory landscape and maintain robust systems and controls to mitigate the risks associated with PEPs.

Learn more about three lines of defence in practice

In January 2024, Ocorian and Newgate Compliance commissioned an independent survey on the three lines of defence in risk and compliance strategies. Our research findings have been compiled into a three-part report, examining the integration of these strategies into anti-money laundering (AML), compliance, and governance infrastructure, exploring the whys and hows.