Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment his Department has made of the potential impact of enhanced due diligence measures related to politically exposed persons on (a) family members and (b) known close associates.

The Money Laundering Regulations require regulated firms to apply enhanced due diligence (EDD) where a customer or beneficial owner is a politically exposed person (PEP), a family member, or a known close associate of a PEP.

These measures are designed to help mitigate the increased risk of bribery and corruption and ensure that attempts to exploit a PEP’s position are detected and referred to law enforcement.

The Government recognises the impact these measures can have and has been clear that PEPs, and their family members and close associates, must be treated fairly and proportionately by banks and other regulated firms. Changes to the MLRs in force since January 2024 are clear that the starting point for regulated businesses must be to treat domestic PEPs as inherently lower risk than non-domestic PEPs.

Last year, the FCA published updated guidance on PEPs to encourage a risk-based approach, following its review of the treatment of PEPs. The government will continue to work closely with the FCA to ensure firms improve their practices where necessary.