The Financial Conduct Authority (FCA) has today 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 FCA’s review will look carefully at firms’ arrangements for
dealing with PEPs based in the UK. While 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
- applying enhanced due diligence and ongoing monitoring
proportionately and in line with risk
- deciding to reject or close accounts for PEPs, their family
members and known close associates
- effectively communicating with their PEP customers
- keeping their PEP controls under review to ensure they remain
appropriate
The review will report by the end of June 2024. The FCA will take
prompt action if any significant deficiencies are identified in
the arrangements of any firm assessed.
Sarah Pritchard, Executive Director of Markets at the
FCA, 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.”
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 has already taken a number of steps to remind the
industry and specific firms that they should follow its guidance
on implementing current rules, and some firms have already
changed their approach as a result. Individuals can also raise
concerns with their financial institution or the Financial
Ombudsman Service.
Notes to editors
- Journalists can request a copy of the terms of reference from
the press office.
- Read FG17/6: The treatment of
politically exposed persons for anti-money laundering
purposes.
- As announced in August we have already begun
to collect experiences from MPs,
peers and other interested parties.
- This review is being conducted in compliance with Section 78
of the Financial Services and Markets Act 2023.
- The review will assess how firms are adhering to the
anti-money laundering legislation and FCA guidance to conduct
proportionate and risk based due diligence on their clients.
- The definition of a PEP derives from the international
standards issued by the Financial Action
Taskforce.
- This is separate to our data request on bank account
closures, which will report back initial findings later this
month.
