Challenges of Handling PEPs Amid NatWest-Nigel Farage Dispute

The recent dispute between NatWest and Nigel Farage has brought to the forefront the complexities global banks face when dealing with politically exposed persons (PEPs).

Banks are obligated to deny services to individuals under international sanctions or suspected of money laundering or financing terrorism. However, they must also apply extra scrutiny to customers identified as PEPs under international standards while avoiding discrimination based on political views.

UK regulators and government ministers have spoken out in defense of freedom of expression, emphasizing that banks should not bar non-sanctioned customers due to their political beliefs. Nevertheless, expressing views that may incite racial hatred can serve as a justification for account closure, as it is considered an offense under UK law.

Banks can close accounts for various reasons, including commercial reasons when accounts fall below a certain threshold in size. The closure of accounts associated with politicians like French far-right figure Marine Le Pen in 2017 raised concerns about alleged "banking fatwas." However, banks stated their decisions were based on regulatory obligations rather than political considerations.

In response to such controversies, Financial Services Minister Andrew Griffith proposed new UK rules to protect consumers vulnerable to account closures on political grounds. Under these rules, banks will need to clearly explain any closure, and customers will be given 90 days to challenge the decision through the Financial Ombudsman Service or find a replacement bank. However, failure to keep up with payments could still be grounds for swift account closure.

Customers who suspect unfair treatment based on their political beliefs can request a Subject Access Request (SAR) under the UK's General Data Protection Regulation (GDPR) to uncover the reasons behind the account closure. The All-Party Parliamentary Group on Fair Business Banking is also investigating banks freezing, withdrawing, or withholding accounts and is seeking case studies from affected parties.

Despite the push for greater transparency and fairness, concerns have been raised about the impact of these reforms on banks' efforts to clamp down on financial crime. Banks are legally required to ensure that the money they safeguard is legally earned and not used for criminal activities. The new rules may inadvertently ensnare innocent individuals, while also limiting banks' ability to provide information to enforcement authorities.

Financial crime experts have emphasized the need for limited exceptions in the new rules to ensure banks can cooperate with criminal investigations and maintain compliance with financial crime regulations.

The ongoing controversy and regulatory scrutiny surrounding the NatWest-Nigel Farage case have highlighted the delicate balance that banks must strike between protecting against financial crime and preserving customers' rights to freedom of expression and fair treatment. The proposed reforms aim to address these challenges, but the banking industry must carefully navigate these complexities to maintain trust and integrity in its operations.

By fLEXI tEAM