Earlier this week, the Financial Conduct Authority (FCA) set out the issues it will consider as part of a review of how financial services firms treat politically exposed persons (PEPs).

The review, which is to report by the end of June 2024, will look at the arrangements that firms have in place with PEPS based on the UK and will consider how firms:

– apply the definition of PEPs to individuals;
– conduct proportionate risk assessments of UK PEPs, their families and known close associates;
– apply enhanced due diligence and ongoing monitoring proportionately and in line with risk;
– decide to reject or close accounts for PEPs, their families and known close associates;
– communicate with their PEPs; and
– keep their PEP controls under review so that they remain appropriate.

Diana Czugler spoke to Law360 about some of the issues in play.

“The underlying issue is that banks and other financial institutions do not sufficiently personalise their approach to assessing PEPs,” she said.

Some other typical issues that have been encountered are around banks applying an unduly high-risk rating to PEPEs, often on the basis of outdates, incorrect, incomplete or simply misunderstood information, and without appreciating each PEP’s individual circumstances or giving them a fair opportunity to make representations. Further, PEP family members or those who no longer hold prominent public functions are also often tarred with the same, unduly broad brush.

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