European Union Establishes Anti-Money Laundering Authority in Frankfurt
by Niamh Hunter
An amendment to money laundering regulations regarding politically exposed persons (PEPs) came into effect on January 10, 2024, dictating that domestic (UK) PEPs are now classified differently from overseas PEPs.
Domestic PEPs are still subject to enhanced due diligence (EDD) but are considered lower risk compared to overseas PEPs. So, what does this mean for businesses conducting due diligence checks?
Understanding the UK PEPs Amendment
Domestic PEPs, individuals within the UK, are now classified differently from their overseas counterparts.
While both remain subject to enhanced due diligence (EDD), the amendment stipulates that domestic PEPs are to be considered inherently lower risk compared to overseas PEPs. This change brings about a fundamental shift in how businesses are required to conduct due diligence checks on PEPs.
Implications for Businesses
For businesses conducting due diligence checks, this change requires a proactive approach to compliance. Understanding the implications of the amendment is crucial to ensuring that policies and procedures are updated accordingly.
The UK government advocates for regulated firms to adopt a more proportionate and risk-based approach to handling domestic PEPs. This means that while enhanced due diligence is still required, it may not need to be as extensive or detailed as for non-domestic PEPs unless specific risk factors are present.
Businesses should promptly update their policies, controls and procedures to reflect the amended regulations.
Clear guidelines should be established regarding the level of enhanced due diligence required for domestic PEPs, taking into account the lower risk categorisation. Despite being classified as lower risk, businesses must not overlook the importance of conducting enhanced due diligence on domestic PEPs.
Risks should be assessed on a case-by-case basis, ensuring that adequate measures are in place to verify the source of funds and wealth and to monitor ongoing business relationships.
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