A report produced for the City watchdog by outside consultants has found that organisations from pawnbrokers to financial technology start-ups have found it increasingly difficult to get banking services from mainstream institutions as lenders become stricter about who they will do business with.
According to a survey of pawnbrokers, published by The Times, 41 per cent had had an account closed by a bank, with one lender shutting more than a third of its accounts with such businesses.
Representatives of the financial technology industry said that many companies had had accounts closed or had not been able to set up an account because of bank fears about doing business with start-ups whose models could be difficult to understand.
Even large charities have been hit by measures aimed at stamping out money laundering using British banks, with one saying that it had been forced to pay more than £40,000 for advice about sanction regimes to deal with increasingly complex questions from its bankers about the uses of their funds.
The Financial Conduct Authority said that while the report appeared to show that some of the concerns over de-risking were overblown, the process was causing stress and inconvenience for some parties, with banks failing to explain their decisions when rejecting or shutting down accounts.
“The report recognises that there appears to be no ‘silver bullet’ to solve it,” the FCA said.
The Times reported in March how Barclays had blacklisted Wafic Saïd, 76, the billionaire businessman and Conservative party donor, telling him that the bank would no longer work for his family or his charity, the London-based Saïd Foundation. The move prompted a furious response from the Syrian-born Mr Saïd, who threatened to sue the lender, saying that it was using him as a scapegoat to improve its own reputation.
The FCA report found that Mr Saïd was unlikely to be alone, with even crown and civil servants who had served abroad finding it more difficult to open a bank account because of their foreign postings. This was a particular problem for diplomats returning to the UK after long careers overseas.
David Cameron has made cracking down on the UK’s role in money laundering a priority. This month the prime minister announced a new law that would make it easier to hold employees of banks and other big businesses criminally liable for money laundering and other frauds.
The new powers will mean the Serious Fraud Office will find it easier to pursue big corruption cases. Instead of having to prove that a “controlling mind” was behind the crime, it will simply have to show that the organisation had failed to stop its staff from engaging in fraud, a change that the fraud-buster has been demanding for several years.
The prospect of the new powers could make banks even more reluctant to take on what they believe to be risky clients, giving the potential for criminal charges to be brought against senior executives.
Already, industry managers privately admit that the increased regulatory burden has made them wary about dealing with anyone considered remotely risky. On top of this, the compliance burden around any unusual clients means that the cost to the bank versus what they can charge means it is often not worth their while to offer them services.
