Morris-Cotterill: UK's Financial Conduct Authority delays publication of its review into Politically Exposed Persons.

The FCA says it would not be appropriate to release the review of the treatment of domestic politically exposed persons, or PEPs, before the general election set for 4 July this year. But we already know what's in it and it's stupid, says Nigel Morris-Cotterill

Contributor

The Financial Conduct Authority is producing a document about domestic politically exposed persons and how regulated businesses should react to the recent change in secondary legislation that provided that domestic PEPs should not be treated as PEPs unless there was a good reason over and above the fact that they are PEPs.

So, to be fair to the FCA, it's not their review that's stupid, it's the Regulation, except that the FCA did not make noise opposing it so it's at least conniving in it if it didn't actually propose it.
Don't confuse a UK polly with Johnny Foreigner

The background is that a politician who has, so far, never managed to be elected to the UK's Parliament (there is no need to name him) was "de banked" because the management team at Coutts didn't like his views so they invented a reason to review his account as a politically exposed person. That made other MPs nervous. So they started a campaign of indignation saying, in effect, how can you lump us in with Johnny Foreigner" thereby implying that UK politicians are less likely to be acting illegally than those from other countries.

There is literally no evidence to suggest that this is true but enough of them worried about e.g. their offshore trusts, overseas shareholdings and out-and-out tax evasion to say nothing of brown envelopes passed in seedy dives and under Westminster ( and local government) tables and, of course, holidays to private islands in glittering seas and free upgrades for the family on airlines owned by supporters.

UK politicians, across the entire political spectrum and from top to bottom have been "at it" since the first structured parliament in the 1700s. It is flying in the sense of reality to argue that there's less of it about than there is in other countries.

So, the FCA's review is based upon a fundamentally flawed premise. We know that it will centre around the "unless there is a reason beyond the fact of being a PEP." But - and here's why the regulation is fundamentally flawed, you don't know if there is a reason if you don't look and you don't have to look unless you have reason to look".

So financial crime risk officers are in a Catch-22 situation.

Now banks, etc. are in an impossible situation. Good risk management says "look." But if they do, the PEP may allege that that looking was unlawful and claim who knows what?

See. Stupid and the FCA should have stood up, argued against it and insisted that the proposal be squashed.

It's too late now. Stupid is as stupid does.

That's not a line, it's a queue of civil servants cashing in.

Cue the queue of large accounting-consultancy companies saying "we'll design your system for you... just give us a few million pounds." And, because the government, the civil service and the qangos like the FCA, State Owned Enterprises and Government-linked Companies are in bed with those accounting-consulting combines the FCA will even see some of its people join them as "experts" to be sold to banks at super-high rates as the revolving door spins faster and faster.

No, FCA. Scrap the whole thing. Tell banks etc. to review all present and past PEPs in the same way, regardless of the Regulations and lobby Treasury to revoke them. Do that because it's not stupid, even though it's too late.

Nigel Morris-Cotterill is a financial crime risk and compliance strategist. He can be contacted at www.countermoneylaundering.com

But they won't do it because, if they do, someone, somewhere, is going to look at the incestuous relationship between consultancies and high levels of government, civil service and qangos. And none of the participants want that.

Bonanza

Why does the FCA think it's a good idea to delay it? There's another thing blowing in the wind - to abolish the principle that "once a PEP, always a PEP." Will that be included in the review? It is, after all, a matter of FCA Regulation, not a matter of Secondary Legislation aka Regulations. If it is, then the delay to the publishing of the review and to any changes in relation to former politicians will release at least 100 past MPs from future inquiry.

Bunce, as they say in the dodgier parts of London's East End.

Gimme, gimme, gimme

So what's it about really?

Seems like nothing ever changes and it's all about self-interest.


Nigel Morris-Cotterill is a pioneer in the field of financial crime risk and compliance. Since 1994 he has advised companies in many sectors in many countries and discussed financial crime risk and compliance strategies with governments. He is author of several books including the seminal "How not to be a money launderer" and the only work on "Understanding Suspicion in Financial Crime" the second edition of which was published recently. He is working on the second volume of "Trade Based Financial Crime - beyond TBML" and later this year will publish the second edition of "Cleaning Up The 'Net - an action plan to combat the use and abuse of the internet for financial crime." Morris-Cotterill is available to brief boards and senior officers and to provide consulting services worldwide to companies, regulators, enforcement agencies and policy-makers, often providing a counter-point to the views of those with a self-interest in making law and regulation complex when it can, and should, be simple to understand and implement.


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