The Financial Conduct Authority (FCA) announced last week that it will begin an investigation into whether “domestic politically exposed persons” – that is, individuals entrusted with a prominent public function – have been improperly excluded as bank customers, resulting in closed accounts.
The United Kingdom’s financial regulatory authority, FCA, states that it intends to start and carry out a review soon of how the country’s financial institutions handle persons with political exposure – so-called PEP persons.
The action follows a controversial decision by private bank Coutts to exclude the former leader of the UKIP party and the Brexit movement, Nigel Farage, as a customer and shut down his accounts – a decision that subsequently led to the resignation of several prominent bank executives.
– Individuals may find themselves excluded from products or services through no fault of their own. As well as potential unfairness, this also potentially harms the reputation of the U.K.’s financial services sector, says the FCA in a comment.
Our review will look carefully at the treatment of domestic PEPs by financial services firms. We’ll report by the end of June 2024. #FinancialServices https://t.co/8NsQRLcdWW
— Financial Conduct Authority (@TheFCA) September 5, 2023
Actions may be taken
The authority estimates that it will publish the results of the investigation in June 2024. However, the FCA flags that it may take action against individual banks prematurely if the authority discovers deficiencies in a bank’s operations.
The usually discreet FCA operation has been the subject of extensive scrutiny in the UK since Nigel Farage stated in July that he was no longer accepted as a customer at Coutts due to political opinions – a private bank for the royal family and other wealthy elites.
Since the Farage affair, the FCA reports that it has reviewed the banks’ decision-making to see if there are signs of political motives. The authority clarified last week that banks should handle PEP-related persons “proportionately” and added that it will specifically look at decisions to reject or close accounts.
The Financial Supervisory Authority announced that it will also evaluate feedback from PEP persons and their families as well as any complaints to the Financial Ombudsman Service. The FCA also states that it is considering taking action against any problem banks before the investigation concludes next year.
PEP
A Politically Exposed Person (PEP) is a person who holds or has held an important public office in a state or international organization.
Important public functions include the head of state, members of parliament, the prime minister, members of the executive of political parties represented in the Parliament or the European Parliament, judges of the Supreme Court and the Supreme Administrative Court, the auditor general, the Executive Board of the Riksbank, ambassadors, high-ranking officers (general, lieutenant general, major general, admiral, vice admiral and rear admiral), the CEO or board member of a state-owned company or a person in the management of an international organization (board members, secretary general, etc.).
A PEP is considered to be in a position, by virtue of his or her position and influence, which in itself creates a risk of being exploited for bribery, among other things.
