The FCA has launched a review on the treatment of domestic Politically Exposed Persons (PEPs), setting out issues that it will consider as part of their inquiry into banks and financial institutions to inform whether necessary action by the regulator is needed.

The FCA plans to review financial services firms, looking into the arrangements and processes they have in place when dealing with PEPs based in the UK, requiring the institutions under scrutiny to provide necessary information that is asked of them to prove compliance.

The FCA does not have the power to change the law by putting in place the PEPs regime, they are however authorised to review how firms are completing processes carried out by banks and financial institutions, for example, how firms are conducting proportionate risk assessments of UK PEPs, their family members and known close associates.

Additionally, regulators will look into how banks apply the definition of PEPs to individuals, how they decided to reject or close accounts, their communication with PEPs, as well as a number of other reviews which will report by the end of June 2024 and the FCA will take prompt action if any significant deficiencies are identified in the arrangements of any firm assessed.

Wayne Johnson, CEO and co-founder, Encompass Corporation, commented:

“As regulators continue to investigate the issue of debanking and treatment of Politically Exposed Persons (PEPs), banks face the challenge of proving treatment of customers is consistent, considered and fair. Amidst this mounting scrutiny, it is critical that institutions utilise technology-driven processes that enable them to act based on verifiable facts, presented by live, authoritative publicly available data – and prove it.

“Today, as banks look to mitigate risk and keep up with an evolving regulatory landscape, technology exists to establish a customer’s identity, providing real-time profiles, generated on demand, to validate and verify a company with full transparency. This approach allows banks to evidence compliance and preserve reputation with a robust Know Your Customer (KYC) process, while also maximising business efficiency.”

Sarah Pritchard, Executive Director of Markets at the FCA, said:

“These rules follow international standards and are designed to keep the financial system clean, free from corruption and guard against financial crime. It’s important that they are implemented proportionately and don’t create unnecessary barriers for public servants and their families. We have already persuaded some firms to improve their approach and we will use this review to identify if we need to provide further guidance to firms.”