Firms denying banking services to politicians will come under renewed scrutiny as the City watchdog launches its review into domestic politically exposed persons (PEPs).
Having written to politicians and civil servants in August to assess the scale of the problem, the Financial Conduct Authority (FCA) will now investigate how banks are enforcing the rules.
PEPs are individuals in prominent public positions. Financial institutions have to conduct stricter checks on PEPs, who are deemed more likely to be involved in corruption or bribery.
Many prominent politicians have argued that banks were being too risk-averse in their approach to PEPs, denying them access to basic banking services.
The FCA will now consider how firms are applying the definition of PEPs to individuals and assess whether the risk assessments are proportionate.
Firms will also be scrutinised on how they make decisions on closing accounts and how they communicate with PEPs.
The review will report by the end of June 2024. The FCA will take prompt action if any significant deficiencies are identified in the arrangements of any firm assessed.
“These rules follow international standards and are designed to keep the financial system clean, free from corruption and guard against financial crime,” said Sarah Pritchard, executive director of markets at the FCA.
“It’s important that they are implemented proportionately and don’t create unnecessary barriers for public servants and their families,” Pritchard added.
The issue of ‘debanking’ has become prominent in recent weeks after Natwest’s controversial closure of Nigel Farage’s Coutts account. The scandal rocked the banking sector, culminating in the resignation of Natwest boss Dame Alison Rose.
A number of politicians, including Jeremy Hunt, have come forward, claiming that they have faced difficulties in accessing basic banking services.