Law change to see British politicians treated as lower risk by banks
UK politically exposed persons (PEPs) must be treated as ‘inherently lower risk’ than overseas politicians, according to the new rules.
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Your support makes all the difference.The Government has changed the law to soften how British politicians are treated by banks, in the wake of the debanking row sparked by former Ukip leader Nigel Farage.
UK politically exposed persons (PEPs) must be treated as “inherently lower risk” than overseas politicians, according to the new rules.
“Accordingly, regulated firms must apply a lower level of enhanced due diligence to domestic PEPs compared to non-domestic PEPs, unless other risk factors are present,” Bim Afolami, the economic secretary to the Treasury, wrote in a statement.
PEPs refer to people who hold public office, or their families, and are subject to extra due diligence by financial firms.
They could effectively pose more or a risk of abusing their position for personal gain, such as by making or accepting bribes, according to the Financial Conduct Authority’s (FCA) guidance from 2017.
But the Government and the watchdog promised to look into the rules over concerns that people were being denied banking services because of their political views.
The Government is fully committed to tackling money laundering, terrorist financing and corruption, but it will always work to ensure this is done in a proportionate, risk-based way that avoids undue burdens on law-abiding citizens
It comes after Nigel Farage revealed that Coutts, owned by NatWest Group, had moved to close down his bank account, prompting a row over the current UK banking rules.
Mr Farage was identified as a PEP, and he said his account had been unfairly shut down because the bank disagreed with his personal and political beliefs.
“Nobody should have their bank account closed because somebody else decides they’re not politically correct,” Chancellor Jeremy Hunt stated during the Conservative party conference in October.
It is already illegal for financial institutions to discriminate against customers on the basis of lawful freedom of expression.
Britain’s largest banks have maintained that they do not discriminate against customers, and that checks form part of important anti-fraud and anti-money laundering inspections, but welcomed a review of the current rules.
But the Government said it was tightening the law to make sure British politicians were not being unfairly targeted by banks.
It said: “While the new requirements have featured for some time in FCA guidance on the treatment of PEPs, legitimate concerns continue to be raised that a number of holders of prominent public positions have encountered problems accessing financial services due to their status as politically exposed persons under the regulations, as have their family members.
“The Government is fully committed to tackling money laundering, terrorist financing and corruption, but it will always work to ensure this is done in a proportionate, risk-based way that avoids undue burdens on law-abiding citizens.”
The changes are being made as part of an amendment to money laundering regulations.
Separately, the FCA is reviewing whether banks apply the rules surrounding PEPs too rigorously and if its guidance needs to be updated.
The Government said it was expecting the watchdog to prioritise the review over the coming months because of the “strength of concern” over the issue.