Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether he has held discussions with the Financial Conduct Authority on the treatment by financial institutions of individuals who are deemed to be politically exposed persons for anti-money laundering purposes.

My officials have been in regular contact with the FCA on the issue of the treatment of Politically Exposed Persons (PEPs) since concerns were first raised in 2017, and my predecessor, Rt. Hon. John Glen MP, met with the FCA and banks in February 2022 to underline the importance of the FCA’s guidance on PEPs.

Further to this, my Treasury colleague Baroness Penn wrote to the Chief Executive of the FCA in June setting out the Government’s expectations for their review into the treatment of PEPs by financial institutions. Following this letter, I wrote to the FCA in July underlining the importance of this review to the Government.

The Money Laundering Regulations require financial institutions and other regulated businesses to carry out enhanced due diligence on PEPs due to the increased risks associated with their positions. However, it is essential that these measures are implemented proportionately, and the Government took action through the Financial Services and Markets Act 2023 to respond to concerns that some financial institutions were failing to do so.

The Act commits the Government to amend the Money Laundering Regulations to explicitly distinguish between domestic and foreign PEPs, and requires the Financial Conduct Authority (FCA) to carry out a review into the adherence of financial institutions to their guidance on PEPs.