The review seeks to identify if there is a need to provide further FCA guidance
The Financial Conduct Authority (FCA) has announced that it will conduct a review of the treatment of UK-based politically exposed persons (PEPs) by financial services firms.
The regulator said it would look carefully at firms’ arrangements for dealing with domestic PEPs and how they applied the definition of PEPs to individuals, conducted proportionate risk assessments, and implemented enhanced due diligence and ongoing monitoring proportionately and in line with risk.
The FCA 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. It will also consider how firms are deciding to reject or close accounts for PEPs, how they effectively communicate with their PEP customers, and keep their PEP controls under review to ensure they remain appropriate.
The review will report by the end of June 2024, and the FCA will take prompt action if any significant deficiencies are identified in the arrangements of any firm assessed.
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.
The FCA, however, pointed out that if rules were applied inappropriately by firms, individuals might find themselves excluded from products or services through no fault of their own.
The regulator said it had 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 had already changed their approach as a result. It added that individuals could also raise concerns with their financial institution or the Financial Ombudsman Service.
“These rules follow international standards and are designed to keep the financial system clean, free from corruption, and guard against financial crime,” stated Sarah Pritchard (pictured), executive director of markets at the Financial Conduct Authority.
“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.”
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