The Financial Conduct Authority (FCA) has urged UK financial institutions – including banks, payment firms and lenders – to make sure that politically exposed persons (PEPs) are treated fairly.
PEPs are individuals who hold or have held important political or public positions, including parliamentarians, senior public servants, and their families.
Because PEPs are exposed to greater risk of financial manipulation, corruption, and money lending, under legislation adopted by parliament, financial institutions have a requirement to consider the risks and do extra checks on PEPs.
Following a review, the regulator said that while most firms did not subject PEPs to excessive or disproportionate checks and none would deny them an account based on their status, there are still a number of measures it would like them to take to ensure they are not being treated unfairly.
Amongst these, the regulator has told firms that they should review the status of PEPs and their associates promptly once they leave public office; communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible; and improve the training offered to staff who deal with PEPs.
“Public service naturally comes with greater scrutiny,” said Sarah Pritchard, FCA executive director of markets and international. “But it must be proportionate and shouldn’t disadvantage people running for office or taking senior public roles, or their families.”
The FCA is also proposing changes to its guidance to reflect the new legal starting point that UK PEPs should be treated as lower risk; make clear that non-executive board members of civil service departments should not be treated as PEPs solely for that reason; and give greater flexibility in who can approve or sign off PEP relationships within firms.
The guidance is open for consultation until 18 October 2024.
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