Context
The FCA has told financial firms to do more to ensure that parliamentarians, senior public servants and their families are not treated unfairly.
Key points to note and next actions
Firms are already required to make checks on so-called Politically Exposed Persons (PEPs), in line with global standards set by the Financial Action Task Force. Due to concerns about how UK firms may be meeting these requirements, FCA has reviewed how firms are treating PEPs.
The FCA found that most firms did not subject PEPs to excessive checks, and none would have been denied an account based on their status. But a number of improvements were identified:
- Firms should ensure their definition of a PEP, a family member or close associate is tightened to the minimum required by law and not go beyond this.
- Review the status of PEPs and their associates promptly once they have left public office.
- Communicate to PEPs effectively, in line with the Consumer Duty, explaining the reasons for the firm’s actions where possible.
- Consider the actual risk posed by the customer and ensure that information requests are proportionate to those risks.
- Improve training offered to staff who deal with PEPs.
The FCA is proposing changes to its guidance which will:
- 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 with firms.
The proposed updates to the existing guidance under FG17/6 are open for consultation until 18th October 2024. The FCA welcomes any further input, though it has been clear that firms can implement these changes now and not wait for the final updated guidance to be published. It will continue to monitor firms’ approach to PEPs through its supervisory engagement and will act if needed. It has reminded all stakeholders that PEPs who are not happy with their experience can complain to the firm and FOS.