FCA Urges Financial Institutions To Enhance Their Handling Of PEPs

The Financial Conduct Authority has instructed financial firms like banks, payment companies, and loan providers to make extra efforts to ensure that people in Parliament, top government workers, and their families are not mistreated.

Under rules made by Parliament, the Financial Conduct Authority has urged financial companies to do extra checks on Politically Exposed Persons (PEPs).

This is based on global rules by the Financial Action Task Force, used in over 200 places. There are worries about how firms in the United States follow these rules, so the Financial Conduct Authority has decided to check how they treat Politically Exposed Persons.

Companies Are Instructed To Reassess PEPs’ Status Promptly

The agency discovered that most companies it reviewed did not make Politically Exposed Persons undergo too many unfair checks. Furthermore, none of these firms would refuse to give them an account just because of their status. However, the regulator said all companies could improve.

According to the update, the agency has informed firms to ensure that the way they define a Politically Exposed Person (PEP), their close friends, or family members is only as strict as the law requires. They should only go within the rules while handling them.

The regulator clearly said companies should quickly check the status of PEPs and their acquaintances when they stop working in public jobs. They must often talk to PEPs clearly and follow the Consumer Duty, explaining why they are doing things when they can.

Since the new rule in January 2024, some companies have begun to make changes. The new rule says that U.K. Politically Exposed Persons (PEPs) and their associates are considered to be less risky than foreign PEPs. In fewer cases, the FCA is arranging for an independent and detailed examination of how some companies do things.

The FCA Is Working With Companies To Find Balance In Their Practices

Sarah Pritchard, the FCA’s executive director of markets and international, stated that public service often comes with more intense scrutiny.

She explained that this level of checking needs to be fair and should not make it harder for people running for office or holding senior public roles, including their families. She pointed out that achieving this balance is essential.

She noted that most companies try to get things right, but there is room for improvement. They explained that they are working with companies struggling to find the right balance to ensure they make the necessary adjustments.

She further said the firm had heard directly from several parliamentarians about the difficulties they and their families faced.