The Financial Conduct Authority has published the findings of its review into the treatment of Politically Exposed Persons (“PEPs”), having delayed the release until after the General Election (as we previously discussed here).

The review found that most firms did not subject PEPs to excessive or disproportionate checks, nor would any deny a PEP an account based solely on their status. However, the FCA nonetheless noted that there is room for improvement within all firms, and has encouraged them to do the following:

• ensure their definition of a PEP, family member or close associate is tightened to the minimum required by law and not go beyond that;
• review the status of PEPs and their associates promptly once they leave public office;
• communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible;
• effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks; and
• improve the training offered to staff who deal with PEPs.

Alongside this, the FCA is proposing changes to its current guidance in relation to PEPs. In particular, it proposes that the guidance be updated to reflect the new ‘legal starting point’ – introduced at the beginning of the year – that UK PEPS and their associates present a lower risk than foreign PEPs. It also proposes changes to make clear that non-executive board members of civil service departments should not be designated as PEPs for that reason alone, and to give greater flexibility in who can approve or sign off PEP relationships within firms.

Commenting on the review, Sarah Pritchard, the FCA’s executive director of markets and international, said: “public service naturally comes with greater scrutiny. But it must be proportionate and shouldn’t disadvantage people running for office or taking senior public roles, or their families. That requires a balancing act. Most firms try to get it right but there is more they can do. We’re following up with those firms that were getting the balance wrong to ensure they make changes. We have heard directly from some parliamentarians about the problems they and their families have faced. We have been clear where we expect firms to make improvements, including in how they communicate with their customers.”

To read the review, click here.

The consultation on the proposed changes to the FCA’s guidance is open until 18 October 2024, and can be read here.