Britain’s new banking pariahs: The rise of the politically exposed person

A number of people are breaking their silence to share how they have fallen afoul of UK anti-money laundering legislation

Nigel Farage claims his account with Coutts & Co was closed because he is a politically exposed person. Reuters

Nigel Farage revealed last week that affluent NatWest-owned bank Coutts & Co had closed his account – despite banking with them for more than 40 years.

He also said he has been refused personal or business accounts by other banks, and that accounts held by members of his family had also been closed.

The reason? Mr Farage claims it is because he is a politically exposed person.

The bank said that it requires customers to borrow or invest at least £1 million ($1.27 million) or hold £3 million in savings, but whatever the reason, the experience seems to be the tip of the iceberg.

A number of people in public office are breaking their silence to share that they, too, have fallen afoul of UK anti-money laundering legislation.

What is a politically exposed person?

Politically exposed people are those with “prominent public functions”, such as government ministers and members of parliament.

The term dates back to 1987, when the G7 agreed to tackle corruption and money laundering, and aimed to ensure banks do additional checks on people in public positions who may be more prone to commit a financial crime.

When Money Laundering Regulations came into effect in 2017, many financial institutions began using the legislation to use “enhanced customer due diligence” on members of the UK Parliament, often ending their use of services with little explanation.

The situation presents operational questions for banks that find navigating the regulation challenging and expensive. And so, oftentimes, they simply close accounts.

Some accuse financial institutions of helping to crack down on people with personal views outside the mainstream.

Who has been affected?

To get an initial idea, more than 5,000 people are part of a Facebook group called “NatWest Closed Down My Account”.

Ivo Dawnay, brother-in-law of former British prime minister Boris Johnson, shared his experience of arriving at the Mexico City airport and trying to change money.

“As I proffered a couple of grubby $100 bills to change to pesos, I filled in a short form – name, address, etc – then noticed the cashier looking quizzically at my passport. He called over a supervisor,” he said.

He was then presented with a new, nearly identical form, that now asked “was I a politically exposed person?”, to which he replied “no”.

“The change office supervisor said, ‘I am afraid our computer says you are. We cannot change your money.’”

“And then I finally understood. Yet another fine thing Boris has got me into,” Mr Dawnay said.

“I must now dodge the money-changers in the temples.

“The sins of the brothers-in-law, it seems, will always be with me, heaped upon my head at the exchange counters of the globe.”

Dominic Lawson, son of former Conservative chancellor Lord Nigel Lawson, shared that his daughter had also been blocked from opening an account with Barclays.

He said they were eventually able to open an account with the bank following “exhaustive form-filling, with much toing and froing between us and Barclays' compliance people in London”.

His wife also tried to set up an account for a charity she founded with a local branch of HSBC, only to be declined because her brother is a viscount.

She did eventually find another institution to bank with.

An Anglican church leader has also spoken out in recent days, accusing Yorkshire Building Society of closing his account when he protested against it allegedly pushing trans “ideology”.

But these are far from the only incidences of financial services being cut or declined.

In November 2021, several peers raised concerns that firms were still imposing disproportionate due diligence requirements on them and their families.

Baroness Hayter of Kentish Town told the House of Lords during a debate on the issue that she had received a “ridiculous six-page questionnaire” from her bank, asking about her former employers, family wealth, lottery wins, jewellery she owned and cars she had.

She called for a meeting with the Treasury and Financial Conduct Authority to discuss her experience “so that banks can spend rather more of their time catching the real crooks instead of wanting to know about my – I am afraid – John Lewis jewellery”.

Sir Charles Walker, former chairman of the Commons Procedure Committee, also called for a parliamentary debate on the matter in 2016, during which various members of parliament spoke of how they and even their children had been treated as potential criminals with no evidence to support it.

“Forget people serving in public life; let us think about those who have left it,” Sir Charles said.

“Ex-army officers, ex-judges, ex-members of political parties and former MPs could be denied the opportunity to serve on charitable boards because their presence would confer the status of politically exposed person on the rest of the board.”

How long does a PEP designation last?

The regulation states that a person should continue to be treated as a politically exposed person “for a period of at least 12 months after the date on which that person ceased to be entrusted with that public function”.

Entering a rather grey area, it also adds that a person can be a politically exposed person “for such longer period as the relevant person considers appropriate to address risks of money”.

What is being done to tackle the issue?

On Tuesday, the government said it would review how banks offer services to politicians.

The government recently passed legislation requiring the Financial Conduct Authority to review how banks treat “politically exposed persons” to “strike the right balance between the customer's right to free speech and the bank's right to manage commercial risk”, said a spokesman for the Treasury.

“We are already looking into this issue and have a passed a law that requires the FCA to review how banks treat politically exposed persons,” a department statement said.

“It would be a serious concern if financial services were being denied to those exercising the right to lawful free speech.”

And the Financial Services and Markets Act 2023 requires the FCA to conduct a review of its management of politically exposed people.

On Wednesday, Andrew Griffith, City Minister, said he had written to the FCA to ask them to them to prioritise their review of blacklisted clients.

“It is crucial that an appropriate balance is struck and that these measures do not unduly burden or prevent democratically elected individuals, public officials or their respected families from access to essential banking services,” Mr Griffith said in his letter.