Bank account closures: what new rules mean for UK customers

Bank account closures: what new rules mean for UK customers

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Following the furore over the closure of Nigel Farage’s accounts at the exclusive private bank Coutts, the government has introduced new rules intended to clamp down on “unfair bank account closures”.

Alison Rose, the chief executive of the bank’s parent company, NatWest Group, has apologised for mishandling the case, though in a letter to Farage she stopped short of reinstating him as a Coutts customer. We take a look at what these changes mean for banking customers across the UK.

What rights do I have to a bank account in the UK?

Everyone in the UK has a legal right to hold a basic bank account, offering the ability to receive and make payments.

Those rules, which came into force under the 2015 payment accounts regulations introduced in European legislation before Brexit, gave people in the UK and other member states a right to have a basic bank account, with protections against discrimination.

The legislation states: “A credit institution must not discriminate against consumers legally resident in the European Union by reason of their nationality or place of residence or by reason of any other ground referred to in article 21 of the charter of fundamental rights of the European Union when those consumers apply for or access a payment account.”

The rights charter states: “Any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited.”

So has Farage had his rights infringed?

Everyone is entitled to obtain a standard bank account, but UK banks, like most businesses, are free to deny additional services to customers for a number of reasons, from threats of violence towards bank staff to suspicions of financial crime.

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Lenders can also choose to close or refuse an account if they believe a customer poses a risk to their reputation. This was one of the key reasons Coutts cited when deciding to shut the former Ukip leader’s account, according to internal documents obtained and released by him on Wednesday.

Banks cannot tell customers if their account is being closed owing to a suspicion of financial crime. But voluntary guidelines laid out by the banking lobby group UK Finance in 2019 say banks that close accounts for other reasons should try to explain their decision to customers in a “sensitive” way that is “easy to understand”, as long as it is “feasible and permissible” to do so.

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How and why do banks monitor clients’ opinions?

Banks have a legal obligation to monitor their clients’ account, and to make risk assessments based on the information they have gathered. Politically exposed persons – individuals who because of their roles as public officials are deemed to carry a higher risk of bribery or corruption – require additional supervision.

Banks can also monitor any negative media coverage of their customers, as well as social media accounts and credit data, but this is usually meant to identify people who could potentially carry out a criminal act.

Coutts’ internal report said the bank was concerned about Farage’s “xenophobic, chauvinistic and racist views” and believed maintaining his accounts posed a reputational risk. The report highlighted his ties to politicians such as Donald Trump, and his views on issues including migration and Russia. It said some of Farage’s comments were “not in line with our views or our purpose”.

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The government has said new rules will prevent banks from making this assessment to “protect freedom of expression”.

How will the government’s proposed changes come about?

The Financial Conduct Authority has been given three months from the end of June to begin a review of the rules governing those considered to be politically exposed persons, like Farage. Behind the call for reform from ministers is the need to break away from rules they see as overly stringently, which Brussels is also reviewing at the moment.

Under the current regime, the authorities must consider the risks of foreign and domestic politically exposed persons in the same way. International rules established by the Financial Action Task Force allow for a lighter touch on domestic individuals.

The FCA has yet to begin a review. It can take up to 12 months before making its recommendations for reform.

What will the changes entail?

Banks will be required to give customers 90 days’ notice – up from 30 days – before closing their account or downgrading their services.

The bank will also be given a new duty “to spell out why they are terminating a bank account, boosting transparency for customers and aiding their efforts to overturn decisions”.

However, the Treasury’s rules may clash with cases where a customer is accused of committing a criminal act. The National Crime Agency could lobby against the change if it believes that telling bank customers why they have lost their account and then giving them a long period to appeal has the effect of undermining a criminal investigation.

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