FCA calls on financial institutions to improve their handling of PEPs

The move follows an investigation into how UK financial institutions comply with legal requirements based on global standards set by the international Financial Action Task Force. The FCA’s investigation was triggered by the NatWest debanking scandal in 2023.

While the investigation found that no firm rejected accounts based on their status and most organizations did not subject PEPs to excessive or disproportionate controls, the FCA said all firms could make improvements.

The FCA put forward recommendations for organizations:

• Ensure that the definition of a PEP is limited to the statutory minimum and does not go beyond it
• Promptly verify the status of PEPs and their staff upon leaving public office
• Communicate with PEPs effectively and in line with consumer duty
• Effectively consider the true level of risk posed by the customer and ensure that requests for information are proportionate to those risks
• Improving the training offered to employees dealing with PEPs

Sarah Pritchard, managing director of markets and international at the FCA, said: “The public service is of course subject to greater scrutiny. But it must be proportionate and not disadvantage people running for office or senior public positions, or their families.” requires a balancing act. Most companies try to do it right, but there is more they can do. We are contacting the companies where the balance was wrong to ensure they make changes.”

The FCA is now continuing to consult the industry on whether UK-based PEPs should qualify for lower risk status and may introduce special protections for non-senior public sector members.

The consultation closes on October 18th.