Banks instructed to ensure fair treatment of politicians in light of debanking evaluation
A review by the FCA revealed that improvements are necessary in how banks apply anti-money laundering rules to politically exposed customers.
After reviewing various financial firms, the city regulator found that all banks need to ensure fair treatment of politicians and their families.
The Financial Conduct Authority (FCA) was tasked by Parliament to examine firms’ practices regarding anti-money laundering (AML) rules, prompted by complaints from parliamentarians facing difficulties in accessing services.
The FCA’s findings, published recently, highlighted that although firms commit not to deny products or services based solely on someone’s political status, there is still room for improvement across all 15 examined firms.
Under UK regulations, Politically Exposed Persons (PEPs) and their relatives and close associates (RCAs) undergo additional scrutiny when seeking financial services.
Following FCA guidance from 2017, British PEPs and their RCAs should be considered lower risk by default, with more intrusive measures taken based on specific risk indicators.
Despite these guidelines, deficiencies were found in the application of these rules by all 15 firms reviewed, which collectively dominate 60% of the UK retail banking market.
The FCA identified wider definitions of PEPs and RCAs used by seven firms, ineffective risk assessment by two firms, ineffective review processes by five firms, and a need for improvement in customer communications, compliance with new regulations, and staff training among most firms.
Despite these findings, the FCA confirmed that firms do not discriminate against UK PEPs or their RCAs and do not regularly apply excessive due diligence measures.
While some PEPs and RCAs faced challenges in accessing services, firms attributed these issues to financial crime concerns rather than political status.
A small number of firms were reported to be not accepting any PEPs as customers.
Sarah Pritchard, FCA’s executive director, emphasized the need for fair treatment of public figures and their families without undue scrutiny, acknowledging that while most firms are striving for compliance, they can still do more to address shortcomings.
The FCA is engaging with firms to ensure necessary changes are made based on the review’s findings and has launched a consultation on proposed guidance amendments to align with the new regulations.
