The Financial Conduct Authority (FCA) has set out issues it will consider as part of a review of the treatment of domestic politically exposed persons (PEPs) by financial services firms.

The review comes as part of a wider look at debanking, which recently became a political issue after Nigel Farage said his account at private bank Coutts had been closed as a result of his political views.

Under legislation adopted by Parliament, financial firms are required to do extra checks on political figures, their families and close associates. More than 200 countries and jurisdictions have signed up to the standards set by the Financial Action Task Force.

However, if rules are applied inappropriately by firms, then individuals may find themselves excluded from products or services through no fault of their own.

The FCA’s review will look carefully at firms’ arrangement for dealing with PEPs based in the UK.

Although the FCA cannot change the law putting in place the PEPs regime, the review will consider how firms are applying the definition of PEPs to individuals; conducting proportionate risk assessments of UK PEPs, their family members and known close associates; and applying enhanced due diligence and ongoing monitoring proportionately and in line with risk.

The review will also consider how firms are deciding to reject or close accounts for PEPs as well as their family and close associates. It will also explore how firms are effectively communicating with their PEPs customers and keeping their PEPs controls under review.

Executive director of markets at the FCA, Sarah Pritchard, said: “These rules follow international standards and are designed to keep the financial system clean, free from corruption and guard against financial crime.

“It’s important that they are implemented proportionately and don’t create unnecessary barriers for public servants and their families. We have already persuaded some firms to improve their approach and we will use this review to identify if we need to provide further guidance to firms.”

The review will report by the end of June 2024, and the FCA will take action should any significant deficiencies are identified in the arrangements of any firm assessed.

Share Story: