Lawyers react after the launch of the UK's politically exposed persons review prompted the FCA to promise ‘prompt action'.
Matthew Russell Partner in the Risk Advisory practice at Ashurst, said: "Unfortunately the treatment of domestic PEPs illustrates how the current AML requirements can resemble a hammer as opposed to scalpel in terms of their implementation: an important tool in the prevention and detection of the proceeds of bribery and corruption within the UK financial system has often been applied bluntly, resulting in the current exercise.
"However, it would be disappointing if this review diverted attention away from the legitimate scrutiny that genuine PEP and their close associates should be subject to, particularly in light of the allegations that have been raised in relation to the awarding of contracts during the pandemic."
Nigel Brahams, Partner at Collyer Bristow, said: "The FATF Guidance includes the wording: "These requirements are preventive (not criminal) in nature, and should not be interpreted as meaning that all PEPs are involved in criminal activity."
"However, such is the concern amongst banks and other firms which need to comply with the rules, that they are widely interpreted and there seems to be a fallback position that anyone who has had any political connections at any time in their career is automatically under suspicion. When that person has more extreme views (i.e. Nigel Farage) the suspicions increase.
"In reality, my view is that firms need to take a holistic view of the actual risk of money laundering from a technocratic perspective and act proportionately." The rules do not need to change but it would certainly be helpful to have some better guidance as to how they should be interpreted to avoid safety first overreach and political anxiety amongst financial institutions."
