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<p>The issue of Politically Exposed Persons’ (PEPs) access to essential banking services
is one that we are taking extremely seriously. The case the Hon Member raises sounds
concerning.</p><p> </p><p>The Government’s position is clear that financial institutions’
must not deny services to PEP customers solely on the basis of their PEP status. The
recently passed Financial Services and Markets Act 2023 commits the Financial Conduct
Authority (FCA) to conduct a review into financial institutions’ adherence to their
guidance on PEPs, and the appropriateness of that guidance, within twelve months of
Royal Assent. This review will assess the extent to which lower-risk PEPs are being
denied access to services in an inappropriate and disproportionate manner, and the
FCA will take action where it identifies serious failures.</p><p> </p><p>The Government
has also taken action through the Financial Services and Markets Act to commit the
Treasury to amend the Money Laundering Regulations to explicitly distinguish between
domestic and non-domestic PEPs in law. This amendment will make clear that, in the
absence of other high-risk factors, domestic PEPs must be treated as lower risk than
non-domestic PEPs and have a lesser degree of enhanced due diligence applied to them.</p><p>
</p><p>Earlier this month, I wrote to the FCA to underline the importance of the FCA’s
review and make clear that the Government expects it to be prioritised over the coming
months. I am clear that the FCA’s review and the Government’s amendment to the Regulations
should lead to a more proportionate and appropriate treatment of PEPs in future.</p><p>
</p><p>My Treasury colleague, Baroness Penn, has also written to the FCA to emphasise
the Government’s expectation that their review should consider to what extent financial
institutions are taking a blanket approach and refusing to offer services to customers
solely due to their PEP status.</p><p> </p>
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