FCA calls on firms to improve treatment of Politically Exposed Persons

Some firms included definitions for PEPs and their relatives and close associates (RCAs) that are not in line with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs). Almost half of the firms reviewed used definitions of PEPs and/or RCAs that are wider than the FCA’s expectations.

Some firms did not have effective arrangements in place to review PEPs and RCAs to ensure the PEP classification remained appropriate after the PEP had left public office. This will be of particular relevance following the general election.

Customer risk assessments did not properly take account of all relevant risk factors and individual circumstances.

Despite PEPs complaining of excessive information requests, the FCA found only a small number of disproportionate requests.

The FCA did not see any instances where PEPs or RCAs were rejected banking services or had accounts closed purely because of the PEP status.

The FCA identified weaknesses in the training provided to staff, including a lack of relevant case studies and examples of good and poor practices.

Most of the firms had not updated their procedures to take account of the amendments to Reg 35 MLRs from 10 January 2024 which means that the starting point for risk assessing UK PEPs and RCAs is that they present a lower risk than overseas PEPs.