What is a 'politically exposed person' and why do the likes of Jeremy Hunt and Nigel Farage claim the status prevents them getting bank accounts?
Retrieved on:
Thursday, July 13, 2023
Review, PEP, Nigel Farage, Crime, Financial Conduct Authority, Law enforcement, Treasury, AML, House, MP, Time, Risk, PEPS, FCA, UKIP, Ownership, Corruption, Barclays, Cryptocurrency, Drug
Reports vary as to why the private bank Coutts decided to close the account of former UKIP leader Nigel Farage.
Key Points:
- Reports vary as to why the private bank Coutts decided to close the account of former UKIP leader Nigel Farage.
- He claims he was excluded for his political views, the bank says the problem was a lack of funds.
- But either way, his case does highlight a wider and longstanding problem faced by so-called “politically exposed persons” or “PEPs”.
What is a PEP?
- A PEP is anyone who is “entrusted with prominent public functions” either in the UK or in any other country.
- However, on top of the PEPs themselves, their families and their “close known associates” are also made subject to strict anti-money laundering laws too.
- That’s because their accounts can be used to receive and hold the proceeds of corruption.
Are banks shutting down the accounts of PEPs?
- In 2015, Barclays had to pay £72 million in one such case involving PEPs.
- Faced with such potential penalties, banks have apparently sought to minimise their own risk of incurring these fines by minimising the number of PEP customers they accept.
- This is despite the fact that the FCA has expressly warned that banks should not end their relationships with customers just because they are PEPs.
Changing the guidance
- In response to the grievances raised by UK politicians, Andrew Griffith, the economic secretary to the Treasury has written to the FCA asking it to fast-track a proposed review of its guidance to banks on dealing with PEP customers.
- Banks should ensure that they direct their oversight resources towards riskier PEP customers and take a lighter-touch approach to PEPs who, by the nature of their activities, have little or no exposure to corruption risk.