The Lower Risk of Domestic PEPs

politically exposed person

As of 10 January 2024, the status of UK politically exposed persons (PEPs) will be regarded differently to the status of their overseas counterparts.  The changes, which came about as a consequence of the Money Laundering and Terrorist Financing (Amendment) Regulations 2023, provide for changes to enhanced due diligence (EDD) requirements relating to those PEPs with prominent public functions by the UK.  The new regulations amend regulation 35 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017  with the result that that the ‘starting point’ of any assessment of the risk posed by a domestic PEP is that they pose a lower risk than a foreign PEP.

The amendment means that whilst domestic PEPs must still be subject to EDD they can be treated as lower risk than overseas PEPs, provided that they do not have other factors that increase the level of risk.

The SRA has recommended that firms should consider amending their policies and procedures to make it clear that domestic PEPs should normally be subject to a lesser standard of EDD.  Indeed, firms that apply the same level of EDD to all PEPs may find themselves in breach of the MLR 2017 from carrying out ‘too much’ EDD.

Share on social media