House of Lords: Politically Exposed Persons

Lord Tunnicliffe Excerpts

Thursday 25th November 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

Although the guidelines were updated in 2017, as the noble Lord will know, clearly there is more work to be done on the proportionate way in which PEPs can be handled. As the noble Lord will know, from April 2018 the Financial Ombudsman Service has had jurisdiction to consider complaints about the treatment of PEPs. Since then, the ombudsman has received fewer than 10 complaints in this area, but I am not being complacent about this matter.

[Lord Tunnicliffe (Lab)]

My Lords, I think we are all asking the same question, but it is a question worth asking. Looking into this, I note that the legislation relating to it is the money laundering regulations 2017. I find SIs impenetrable but I find the Explanatory Memorandum more useful. Paragraph 7.16 of the Explanatory Memorandum is so clear:

“The Regulations require firms to assess the risk posed by individual PEPs on a case-by-case basis and tailor the extent of EDD”—


enhanced due diligence—

“accordingly.”


On the prior point, it states:

“Refusing to establish a business relationship or carry out a transaction with a person simply on the basis that they are a PEP is contrary to the letter and the spirit of the law.”


How do Her Majesty’s Government ensure that this requirement is met?

[Viscount Younger of Leckie (Con)]

To be upfront about it, the Treasury is responsible for the money laundering regulations but the regulations are not prescriptive in setting out how firms should carry out customer due diligence. Instead, they require firms to take a proportionate approach commensurate with their assessment of the risk. As I said earlier, clearly there is more work to be done. Customer due diligence allows firms to obtain reasonable satisfactions that customers are who they say they are and that there are no legal barriers, but clearly there is more work to be done on PEPs.