FCA advises firms to optimise treatment of PEPs

In a bid to ensure that parliamentarians, senior public servants, and their families are not regarded unjustly, the FCA required financial firms to improve how they treat these customers. Currently, under legislation adopted by Parliament, financial firms follow international standards imposed by the Financial Action Task Force and implemented by over 200 jurisdictions. Also, the move comes amid concerns about how providers in the UK are meeting these conditions, with the authority reviewing their treatment of PEPs.

FCA has directed financial firms, including banks, payment firms, and lenders, to optimise treatment of politically exposed persons (PEPs).

In its assessment, the FCA discovered that most financial firms did not subject PEPs to excessive or disproportionate checks, and none would reject them an account based on their status. Despite this, the FCA believes that all firms could optimise their operations, with the regulator directing them to:

Ensure their definition of a PEP, family member, or close associate is linked to the minimum required by law and exceed it;
Assess the status of PEPs and their associates once they leave public office;
Communicate effectively to PEPS, while following the Consumer Duty, providing explanations on the reasons for their actions where possible;
Take into account the actual level of risk posed the customer and ensure that all information requests are proportionate;
Enhance the training delivered to staff who deal with PEPs.

What other measures does the FCA propose?

According to the FCA’s officials, even if most financial firms treat PEPs and their associates equally to other individuals, the regulator considers that they can do more in this regard, including better communicating with customers. The FCA proposed modifications to its guidance to reflect the new legal starting point that UK PEPs should be treated as lower risk, clarify that non-executive board members of civil service departments should not be treated as PEPs only for that reason, and provide increased flexibility in who can approve or sign off PEP relationships within firms.

Moreover, the regulator mentions that the guidance is open for consultation until 18 October 2024, welcoming any further input. After the improvements have been acknowledged, all firms should implement them and not wait for the final updated guidance to be published. In addition, the FCA intends to continue to monitor firms in relation to how they approach and treat PEPs via its ongoing supervisory engagement.

FCA directs firms to optimise treatment of PEPs

What other measures does the FCA propose?