UK Financial Conduct Authority (FCA) to Review Treatment of Politically Exposed Persons (PEPs)
The UK Financial Conduct Authority (FCA) has announced that it will conduct a review of the treatment of “politically exposed persons” (PEPs). This move comes as part of the FCA’s ongoing efforts to ensure a clean and corruption-free financial system.
The FCA has highlighted several areas that will be scrutinized as part of the review. These include the application of the definition of PEPs to individuals, conducting risk assessments of UK PEPs, their family members, and known close associates, as well as applying enhanced due diligence and ongoing monitoring proportionately and in line with risk. The FCA will also assess financial services firms’ decisions to reject or close accounts for PEPs and their associated individuals.
Effective communication with PEP customers and the regular review of PEP controls to ensure their appropriateness will also be examined during the review, which is set to conclude by June 2024.
Sara Pritchard, the FCA Executive Director of Markets, emphasized the importance of implementing these measures proportionately. She stated, “It’s important that they are implemented proportionately and don’t create unnecessary barriers for public servants and their families.” Pritchard also noted that the FCA has already persuaded some firms to improve their approach and will use the review to identify if further guidance is needed.
The FCA acknowledged that financial firms are currently required to conduct additional checks on political individuals and their related parties. However, they also highlighted the potential for erroneous implementation, which may exclude individuals from accessing financial products and services unfairly.
The announcement of this review follows the recent controversy surrounding the closure of Nigel Farage’s account at Coutts, a UK financial institution. It was revealed that Farage’s account was closed due to his personal political beliefs, leading to significant public outcry. The incident resulted in the “retirement” of Coutts’ Chief Executive and the Chief Executive of NatWest, the owner of Coutts, due to the perceived bigotry displayed by the firm.
Through this review, the FCA aims to ensure fair treatment of PEPs, while maintaining the integrity and security of the financial system.
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