On 18 July 2024, the Financial Conduct Authority (FCA) published the findings of its multi-firm review into the treatment of politically exposed persons (PEPs). The review followed high-profile complaints—including that of Reform UK leader Nigel Farage—about unfair debanking due to political views.

Most regulated firms will encounter PEPs and their relatives and close associates (RCAs) at some point. This article summarises the FCA’s findings and sets out practical next steps for improving PEP compliance in line with current regulations and screening expectations.

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FCA PEP Review: Scope and Context

The FCA contacted over 1,000 PEPs and received 65 responses. It then selected 15 firms from various retail sectors—including EMIs, payment firms and wealth managers—for a more detailed review.

While the sample size was small, the regulator made it clear that all firms are expected to apply the lessons learned across the industry.

Key Findings on PEP Identification and Risk

The FCA’s core message: firms must apply a proportionate approach to PEP compliance.

Many firms were compliant overall, but several fell short in specific areas:

  • PEP identification and classification were inconsistent. Some firms treated uncles, nieces and nephews as RCAs without a risk-based rationale.
  • Firms lacked a clear declassification process, meaning some PEPs remained subject to enhanced due diligence (EDD) long after leaving public office.
  • Several firms did not record or explain risk assessments for PEP relationships.
  • Group-level compliance frameworks often exceeded or conflicted with UK rules.
  • Customer communications with PEPs lacked clarity—especially important now that the Consumer Duty is in force.
  • Training on PEP regulations was found to be generic and insufficiently tailored.

The FCA reminded firms that senior management approval for onboarding or maintaining PEPs is a legal requirement (under Regulation 35(5)(a) of the Money Laundering Regulations).

Strengthening Your PEP Screening Controls

To align with the FCA’s expectations and upcoming changes to Finalised Guidance 17/6, firms should review and enhance their PEP screening controls:

  • Define a clear risk appetite for dealing with both UK and foreign PEPs and RCAs.
  • Update customer risk assessments (CRAs) to reflect this appetite and ensure they’re evidence-based and holistic.
  • Ensure policies reflect January 2024 amendments to Regulation 35, which emphasise treating UK PEPs and their RCAs as low risk unless there is clear evidence to the contrary.
  • Align global policies with UK-specific regulations—especially if operating as part of a wider group.
  • Improve communications: make them clear, tailored and explain any adverse decisions.
  • Automate ongoing monitoring triggers for adverse media, secrecy concerns, or account behaviour.

Enhancing Oversight and Governance for PEP Compliance

To demonstrate robust compliance and governance, firms should:

  • Appoint the MLRO to approve low-risk PEPs and involve senior managers in decisions on higher-risk clients.
  • Regularly assess management information and MI dashboards to include PEP-related metrics.
  • Dedicate a section of the Consumer Duty board report to assessing the fair treatment of PEPs and RCAs.
  • Clearly document all decision-making and risk-based justifications.

Targeted Staff Training on PEP Regulations

Generic e-learning isn’t enough. Firms should implement role-specific training that:

  • Covers the FCA’s updated PEP guidance (expected Q4 2024),
  • Offers practical scenarios for identifying and handling PEPs and RCAs,
  • Clarifies risk classification, declassification, and regulatory requirements,
  • Is refreshed regularly in line with legislative changes.

Quality Assurance and Risk-Based Screening

Firms are encouraged to:

  • Use open-source intelligence and existing documentation for routine EDD rather than repeatedly asking clients for the same information.
  • Implement templates for standard communications, while maintaining flexibility to tailor messages.
  • Review and refine internal controls and screening systems, including through a mock Section 166 review or other independent quality assurance checks.

Summary: Aligning Your Firm with FCA Expectations

The FCA wants a PEP compliance regime that targets high-risk cases while avoiding disproportionate measures against low-risk individuals. Treating PEPs and RCAs unfairly—or applying a box-ticking approach—could lead to enforcement action or reputational harm.

Need Expert Support with PEP Compliance?

C&G Regulatory Solutions has deep experience supporting brokerage firms, payment institutions, and asset managers with financial crime prevention frameworks. Our advisory services include:

  • Ad hoc guidance on PEP and RCA issues
  • Drafting and reviewing policies and procedures
  • Financial crime health checks
  • Tailored staff training based on real-world regulatory expectations

Visit our Services page or contact us to learn more.