"A politically exposed person"

Fraser Nelson, writing in the Spectator, describes how the Royal Bank of Scotland, a state-owned bank, is now asking its customers to state their political party affiliation when applying for credit cards. Nelson called the bank himself and recorded the ensuing conversation. The following is self-explanatory.


I used the details of my mother-in-law’s real company and when they started to talk politics, I switched on the tape recorder. Here is the audio, the transcript is below.

FN: Could you repeat the exact question again?

RBS: Is she a member of any political party, basically? (note: he was referring to my mother-in-law)

FN: I must admit I’m not entirely happy with answering that question. I don’t see what relevance it has to…

RBS: [He says a supervisor will call me back, as one of the company directors lives abroad]

FN: But listen, I mean when you call back, we may be prepared to answer that political question. But can you explain again one more time why it’s relevant?

RBS: It is put upon us by the Financial Services Authority to try and omit any money laundering and things like that. It helps us crack down on fraudulent merchants by asking these types of questions.

FN: But I don’t understand why, say, if she is a member of the Conservative Party or Labour Party, that is related to fraud?

RBS These are questions thrust upon us by the Financial Services Authority, sir. It would be the same no matter where you apply for merchant services, the same question would be asked. It is legally binding. It’s to try and omit any fraudulent activity. I presume the reason why we ask that question is because there is a high volume of fraud in that sector. Where people who are of that sort of nature maybe are inclined to commit fraud. I’m not for a minute implying that she will do. But that’s just trying to protect us and you, as well, you see.

Last night, RBS acknowledged that their staff has been asking about political affiliation after all. Their statement:-

“As part of our implementation of FSA guidelines around Anti-Money Laundering activities, we introduced questions on Politically Exposed Persons as part of our account opening procedures. This has meant that staff in some instances have been asked to enquire about whether someone is a Politically Exposed Person. Unfortunately, they have asked the question of political affiliation instead. We have taken all necessary steps to ensure that our customers teams are aware of the difference and will change practices with immediate effect. This issue will also be highlighted in our ongoing staff training programmes on this important topic.”


What is a “politically exposed person”? Is it a Muslim? Or  Jew? Is it a person who belongs to either major party or one of the many smaller ones? Recently the UK announced plans to store all travel itineraries in a database for as long as a decade. The Telegraph reports:

Anyone departing the UK by land, sea or air will have their trip recorded and stored on a database for a decade. Are people who have gone to the wrong places, seen the wrong people “politically exposed”?

Passengers leaving every international sea port, station or airport will have to supply detailed personal information as well as their travel plans. So-called “booze crusiers” who cross the Channel for a couple of hours to stock up on wine, beer and cigarettes will be subject to the rules.

In addition, weekend sailors and sea fishermen will be caught by the system if they plan to travel to another country – or face the possibility of criminal prosecution.

Johnathan Pierce at Samizdata says that putting things under government control does not remove moral hazard.

The exact term is to ask whether a wannabe client is a “politically exposed person”. Now, this maybe more of a cockup than a sign of anything more sinister, so my trigger finger may be getting unnecessarily twitchy, but still. This is, as the commenters on the article Fraser writes says, a classic demonstration of why state-owned banks are bad and ripe for corruption. Special favours will be demanded by the ruling party’s clients. In France, remember, the former state-run Credit Lyonnais bank was a sink of corruption.

RBS is also the parent of Coutts, the private bank, and RBS Coutts, the international version of said. These banks provide clients with offshore accounts. The risk is that such a bank could be put under political pressure to deliver details about its clients, a fact that becomes particularly relevant with so many governments currently trying to shut down so-called “tax havens” such as Switzerland.


Of course, it may be foolish to worry about these things. But in principle, a greater amount of government control over the economy, especially the banking industry, may not be without consequences. After all, when the government owns stuff, they call the shots. One may like the consequences, especially if one is not a “politically exposed” person, but a politically favored one, but there may be consequences all the same. Of all the questions that are said to be asked in Chicago, the most important one of all is “who sent you?”


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