Domestic PEPs after the FCA's Regulation 35 review
The FCA's multi-firm review of the treatment of domestic Politically Exposed Persons concluded that most firms are broadly meeting the revised statutory expectation but identified pockets of over-application, particularly to family members and known close associates. We work through the practical implications for firms operating retail banking, wealth and payment services, and set out how to evidence a proportionate approach to a supervisor without under-mitigating the underlying risk.
The revised standard
Domestic PEPs are, by default, lower risk than foreign PEPs. Firms must calibrate EDD accordingly and must not apply blanket friction to family members and known close associates without a risk-based justification.
Evidencing proportionality
The firm's PEP policy must set out the calibration between domestic and foreign PEPs, the trigger for enhanced measures, and the record required. A supervisor will ask to see a worked example.