Interestingly, it only seems to be the monolift feds where you see the back spotter hugging the lifter. Never in the IPF, even with stupid over 400kg equipped squats. Yet there is nothing to suggest there are more spectacular spotting failures in the IPF than elsewhere.
Hands around the lifter is not specifically prohibited by the rules, but if the spotter so much as touches the lifter, it's instant red lights. In other feds, the spotters are allowed a lot more leeway. I suspect that the reason the back spotter's hands are kept much further away in the IPF is a product of not wanting to accidentally invalidating the lift and getting out of the way of the walkout from the squat stands.
I think it makes for a much better spectacle when the back spotter has their hands away.