London, September 5, 2023 – The Financial Conduct Authority (FCA) has announced the commencement of a comprehensive review concerning the treatment of Politically Exposed Persons (PEPs) within the domestic landscape. This investigation will closely scrutinise the practices of financial services firms in their engagement with PEPs situated in the United Kingdom.
While the FCA acknowledges its lack of authority to alter the legislative framework governing the PEP regime, the review will delve into the operational methodologies adopted by firms, focusing on several key aspects, including:
-Accurate application of the PEP definition to individuals.
-Implementation of proportional risk assessments for UK-based PEPs, their close associates, and family members.
-Adherence to enhanced due diligence and continuous monitoring in alignment with risk profiles.
-Appropriate decision-making processes regarding the acceptance or closure of accounts held by PEPs, their family members, and close associates.
-Effective communication strategies tailored for PEP clientele.
-Ongoing evaluation of PEP controls to ensure their continuing relevance.
Expected to conclude by June 2024, the review promises to be vigilant, with swift interventions anticipated in the event of significant operational shortcomings identified within any assessed firm.
Sarah Pritchard, FCA’s Executive Director of Markets, emphasised the international standards that underpin these regulations, underscoring their role in safeguarding the financial ecosystem against corruption and financial crimes. Pritchard also highlighted the importance of applying these rules proportionately, to prevent undue impediments for public servants and their families. She further indicated that the FCA aims to offer additional guidance to firms based on the findings of this review.
Under the directives enacted by Parliament, financial institutions are mandated to undertake heightened due diligence on political figures, their kin, and close associates. Over 200 countries and jurisdictions have embraced the standards set by the Financial Action Task Force. However, if these rules are misapplied by firms, individuals may inadvertently face restrictions on accessing financial products and services.
Having already taken proactive steps to remind the industry and specific firms to align with existing guidelines, the FCA has witnessed a positive response, with some entities amending their practices accordingly. Individuals also retain the avenue to voice concerns directly to their financial institution or approach the Financial Ombudsman Service.
