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Dealing with politically exposed persons: Navigating the changing regulatory environment
Journal of Financial Compliance,
1
(2),
102-111
(2017)
Abstract
The increased risk posed by dealings with politically exposed persons (PEPs) will already be well known to regulated firms. Although regulators have been keen to emphasise the need to manage this risk, clear and detailed guidance on exactly how firms must do so has been harder to come by. New regulatory requirements will bring the practical challenges involved in dealing with PEPs into sharper focus. This paper provides an overview of the current PEPs regime and highlights forthcoming changes at both the EU and UK level. We examine, in particular, the proposed changes to the UK PEP regime, aimed at promoting a risk-based approach to this category of customers. We also provide an overview of the practical compliance steps that firms should consider taking in relation to PEPs in order to ensure that they are meeting regulatory expectations.
Keywords: politically exposed persons, PEP, AML, 4MLD, 5MLD, Criminal Finances Bill, Bank of England and Financial Services Act 2016
The full article is available to subscribers to the journal.
Author's Biography
Susannah Cogman is a partner at Herbert Smith Freehills specialising in financial crime and related regulatory work. She advises corporates, financial institutions and professional services firms in connection with anti-corruption, anti-money laundering, sanctions and fraud compliance, as well as investigations matters. A recognised expert in the field, Susannah has been ranked in band 1 for corporate crime in Chambers UK 2013–2017, described as having ‘extraordinary knowledge and ability’, ‘a very steadying presence’, ‘technically superb’, ‘a true expert in her field’ and ‘a “talented” and “astute lawyer”, who “knows what corporate clients need”’. Legal 500 2016 rank her as a leading individual for corporate crime, and Global Investigations Review named her in their list of ‘40 Under 40 – the world’s leading investigations specialists’ in April 2014. Susannah speaks and publishes widely on AML and other topics. She is also a member of the UK Law Society’s Money Laundering Task Force (which advises the profession and the Law Society on AML matters) and the American Bar Association Section of International Law International Criminal Law Committee. Susannah is a consultant editor of the Lloyds Law Reports: Financial Crime series. She runs the BBA’s newly appointed MLRO induction workshop and is a regular speaker at other industry fora.
Elizabeth Head is a senior associate in Herbert Smith Freehills’ London Corporate Crime and Investigations team. She advises and represents clients on financial crime matters, in particular in respect of fraud, corruption and money laundering, as well as on the implementation of financial crime compliance programmes. She also regularly advises a range of clients in different industries on issues relating to various international sanctions regimes. Elizabeth has experience acting in a variety of external and internal investigations, including investigations conducted by, or at the instigation of, the Serious Fraud Office and Her Majesty’s Revenue & Customs. Elizabeth advises clients, particularly FCA-regulated financial institutions, on areas including the development and implementation of anti-money laundering systems and controls, issues identified during the institution’s due diligence and continuous monitoring of customers/prospective customers, as well as on the reporting of suspicions of money laundering. Elizabeth has recently completed a secondment to the Corporate Crime and Investigations team in Herbert Smith Freehills’ New York office and has also spent time on secondment working in the compliance departments of two large investment banks, both in London and New York.
