The Financial Conduct Authority (FCA) has launched an inquiry to investigate the phenomenon of ‘debanking’, aiming to assess the extent to which individuals, particularly politically exposed persons (PEPs) such as politicians and military leaders, have faced the denial of banking services.
This move comes in the wake of the recent controversy involving Nigel Farage, whose accounts faced potential closure. The FCA plans to dispatch letters to PEPs on Tuesday, seeking insights into the challenges they encounter when attempting to secure banking services and whether this issue is widespread.
The inquiry is a component of a comprehensive review of regulations concerning PEPs, obliging financial institutions to closely examine accounts and transactions of individuals at elevated risk of bribery or corruption. Such scrutiny can lead to the refusal or termination of banking services due to the substantial resources required or the perceived level of risk involved.
This review has been prompted by the contention that domestic PEPs should undergo less rigorous assessment than their foreign counterparts. However, recent scandals surrounding the former leader of Ukip, Nigel Farage, have brought renewed focus to this matter.
Encompass Corporation’s CEO and co-founder, Wayne Johnson, weighed in on the issue, stating: “As the debanking issue continues to be a central concern for regulators and banks encounter heightened scrutiny, it is imperative that their actions are grounded in verifiable facts derived from live, authoritative publicly accessible data. Ensuring this will not only assist them in risk mitigation but also facilitate compliance with rapidly evolving regulatory requirements.
“Existing technology offers the means to ascertain a customer’s identity, generating real-time profiles on demand for company validation and verification. This approach, coupled with dynamic automation of the Know Your Customer (KYC) process, empowers banks to adapt to regulatory shifts while optimizing operational efficiency. By embracing robust technology-driven procedures, banks can sidestep the repercussions of non-compliance, including reputational damage and fines.”
In a statement released on Monday, the FCA outlined its intentions: “We are currently evaluating the implementation of the politically exposed persons regime by financial service providers and considering whether adjustments are necessary for UK-based PEPs.
“We are actively seeking direct input from UK PEPs to understand their firsthand experiences, including any challenges they have encountered. To this end, we are proactively engaging with parliamentarians and other UK PEPs at an early stage.
“We will unveil the comprehensive terms of reference for this review in September, with a final report expected by June of the subsequent year.”