Insights Politically Exposed Persons: FCA provides update on its review

The Financial Conduct Authority (“FCA”) has announced that the findings of its review into the treatment of Politically Exposed Persons (“PEPs”) by financial services firms – due to be published at the end of June – has been delayed as a result of the UK general election.

The review was announced last year to consider how regulated firms treat domestic PEPs, and in particular how they are meeting their obligations under anti-money laundering legislation and FCA guidance to conduct proportionate and risk-based due diligence. PEPs are subjected to additional scrutiny as they may be able to abuse their public office for private gain and use the financial system to launder the proceeds of this abuse of office. Enhanced due diligence is also applied to family members and close associates of PEPs.

As the FCA explained at the time of the announcement of the review, there were “concerns that firms may not be treating customers individually as directed by both the legislation and FCA guidance. This matters as individuals may find themselves excluded from products or services through no fault of their own. As well as potential unfairness, this also potentially harms the reputation of the UK’s financial services sector”. As a result, the FCA committed to engage with firms, other stakeholders, and UK PEPs themselves to ensure that firms are managing the overall risks of all PEPs ‘effectively and proportionately’. In particular, the FCA stated that it would investigate whether firms were:

  • applying the definition of PEPs to individuals
  • conducting proportionate risk assessments of UK PEPs, their family members and known close associates
  • applying enhanced due diligence and ongoing monitoring proportionately and in line with risk
  • deciding to reject or close accounts for PEPs, their family members and known close associates
  • effectively communicating with their PEP customers
  • keeping their PEP controls under review to ensure they remain appropriate

In light of the UK general election, the FCA has concluded that it would be inappropriate to publish the findings of its review in the pre-election period. It will therefore publish it in July, once Parliament has returned.

To read more about the review, click here.