This approach is in line with international norms promoted by the Financial Action Task Force (FATF), which have been embraced by more than 200 governments globally, claims Napier AI.

The proposed changes to the current guidelines by the FCA are complex. First of all, they establish a new legal presumption that views PEPs in the UK as naturally less risky than those in other countries. The rules also make it clear that non-executive members of civil service department boards shouldn't be automatically labeled PEPs. Another important change gives businesses more flexibility in deciding who in the company has the power to authorize or manage connections with PEPs.

Prominent FinTech company Napier AI has voiced strong support for these reforms, acknowledging that financial institutions must put in place appropriate and proportional risk-sensitive procedures. Napier AI asserts that rather than depending on a general, one-size-fits-all approach, it is imperative that these measures be implemented sparingly, on a case-by-case basis, in order to appropriately assess the danger that each particular PEP poses.

Diverse international definitions and the uneven status that PEPs may have in various countries make handling PEPs even more difficult. Due diligence errors and regulatory issues may result from this discrepancy, especially for UK financial organizations with global operations. In addition, Napier AI supports a more comprehensive understanding of family ties outside of a PEP's immediate circle, arguing that cultural variations may expand the definition of "close family" to encompass grandparents, siblings, and other extended family members, calling for a more sophisticated approach to risk assessment.

PEPs must be screened using international commercial databases, but Napier AI stresses that these databases must precisely represent the statutory definitions of PEPs and their associates and strongly match names. Network analytics, which uses analytical methods to map out and visualize links and connections, must be added to these datasets in order to improve PEP detection and monitoring.

Napier AI advocates for a framework that takes into account regional regulatory quirks while upholding general compliance requirements, and it promotes the development of a global minimum standard for recognizing and managing PEPs across several countries. They also draw attention to the dangers of relying too much on past data, which might mask present dangers and postpone reactions to changing threats. Rather, they suggest a continuous, real-time method of tracking and evaluating hazards associated with PEP.

The approval procedures for PEP relationships are likewise covered by the suggested amendments to the guidelines. It is proposed that, even though lower risk PEPs might need less strict oversight, it is still essential to maintain regular internal communications and standardised training to ensure consistent application of the established risk criteria. This is done with particular reference to the oversight role of the Money Laundering Reporting Officer (MLRO) under SMF 17.

A Perpetual Customer Risk Assessment (PCRA) methodology, which incorporates real-time data from several sources to provide a thorough, 360-degree assessment of a client's risk profile, is advocated by Napier AI. This strategy promotes a more secure financial environment by enabling more informed decision-making and guaranteeing that financial institutions can quickly adapt to changes in a PEP's risk status.