The FCA has urged financial firms to take further steps to ensure that politically exposed persons (PEPs) and their families are treated fairly.
This directive comes in response to an inquiry into how UK financial institutions are adhering to legislative requirements aligned with global standards set by the Financial Action Task Force. The investigation was initiated due to the debanking controversy involving NatWest in 2023.
While the inquiry found that most institutions were not denying accounts based on PEP status and did not impose excessive checks on them, the FCA indicated that there is room for improvement across the sector.
The FCA issued several recommendations for financial organizations, including:
– Defining a PEP according to the minimum legal requirements without exceeding that threshold.
– Quickly reviewing the status of PEPs and their associates once they exit public office.
– Effectively communicating with PEPs in accordance with the Consumer Duty.
– Assessing the actual risk posed by customers and ensuring that information requests are proportionate to those risks.
– Enhancing training for staff who interact with PEPs.
Sarah Pritchard, executive director of markets and international at the FCA, commented, “Public service naturally comes with greater scrutiny. But it must be proportionate and shouldn’t disadvantage people running for office or taking senior public roles, or their families. Most firms try to get it right, but there is more they can do. We’re following up with those firms that were getting the balance wrong to ensure they make changes.”
The FCA is also consulting the industry on whether UK-based PEPs should be classified as lower risk and is considering potential special protections for non-executive members of the civil service. This consultation will conclude on October 18th.