Over the past year there have been several high-profile cases where politicians have accused financial institutions of treating them unfairly.

The regulator began in investigation into financial institutions denying politicians access to their services due to their political views following a row between Nigel Farage and Coutts Bank last summer.

Under legislation adopted by Parliament, financial firms are required to do extra checks on so called Politically Exposed Persons (PEPs). This follows global standards set by the international Financial Action Task Force and implemented by more than 200 jurisdictions.

The FCA reviewed how firms are treating PEPs and found that improvements needed to be made.

The regulator said firms need to:

• Ensure that their definition of a PEP, family member or close associate is tightened to the minimum required by law and not go beyond that
• Review the status of PEPs and their associates promptly once they leave public office
• Communicate to PEPs effectively and in line with the Consumer Duty, explaining the reasons for their actions where possible
• Effectively consider the actual level of risk posed by the customer, and ensure that information requests are proportionate to those risks
• Improve the training offered to staff who deal with PEPs.

The regulator has also proposed making changing to its guidance to reflect the new legal starting point that UK PEPs should be treated as lower risk, make it clear that non-exec board members of civil service departments should not be treated as PEPs, and to give greater flexibility in who can approve PEP relationships within firms.

Sarah Pritchard, the FCA’s executive director of markets and international, said: “Public service naturally comes with greater scrutiny. But it must be proportionate and shouldn’t disadvantage people running for office or taking senior public roles, or their families. That requires a balancing act. Most firms try to get it right but there is more they can do. We’re following up with those firms that were getting the balance wrong to ensure they make changes.”

The consultation for changes to the FCA guidance is open until 18 October.