I put some questions about this to RBS earlier today. Here are their replies, and my comments.
Q1 - What does RBS understand by the term "Politically Exposed Person (PEPs)"A - A PEP can be defined as an individual who is or has been entrusted with a prominent public function; examples include heads of state, senior politicians, government, judicial or military officials, senior executives of state owned corporations and political party officials. The definition is not intended to cover middle ranking or more junior individuals.
Comment: So we're talking about a handful of people in the country - less than 0.001% of the population. So why were ordinary members of the public being asked? On the off chance that they could be a head of state? This doesn't stack up.
Q2 - Can you give an example where this had relevance to services provided by Streamline?
Comment: ie - there is no reason why RBS would have any reason to believe that the people applying for its accounts were heads of state or ministers. The question is absolutely unjustified.
Comment: So that's a 'yes''. Understandably, they don't want to say how many customers have been asked about their politics.
A: The FSA presides over the UK AML Regulatory environment which includes the Joint Money Laundering Steering Group. Within that, firms must evidence that they take all reasonable steps to Know Your Customer; this may feasibly include identifying and recording PEP connections.
Comment: So yes, the question is discretionary. RBS was telling customers (ie, me) that the question of their political affiliation was "thrust upon" them by the FSA. This is flatly untrue: they are simply required to take steps against money laundering. RBS chose to use this as a reason to ask the political question.
Q5. Why was this question being routinely asked by RBS Streamline?
Comment: So "at the turn of the year" - about the same time that RBS went into state control - this political question was introduced into the "know your customer" process. Why? There are some things a bank should not know about its customers: mainly, anything about their politics. There are companies who have lists of Politically Exposed Persons - there are only a few thousand of them in the world. RBS should check their customers against that list. RBS had absolutely no excuse for asking customers if they are "politically exposed" - a phrase which can easily be taken the wrong way, especially when asked by a state-controlled bank.