Nigel Farage hit the headlines again in July – only this time around he wasn’t the source of controversy but rather the one to point it out, revealing the fact that UK banks are closing more than 1,000 accounts every working day. Nigel drew public attention to the matter through an allegation that his Coutts account had been closed simply because his political views didn’t align with the views of the bank. While Coutts dispute his version of events and say his account was closed after he fell below the prestigious lender’s wealth requirements, the episode has shone a light on the widespread practice of “debanking”, which has increased exponentially over the past few years. Going back several years to 2016-2017, only 45,000 accounts were closed by UK banks, but by 2021-22 there were more than 343,000 closures – well over 1,000 on each and every business day.
Unfortunately UK citizens are not alone in this, because at the same time Nigel Farage was bringing his plight to the attention of the press, another crisis was unfurling across the pond as the Bank of America shut down an account owned by the ultra-conservative Christian charity, Indigenous Advance Ministries (IAM). While IAM’s principal purpose is to support impoverished Ugandans, it is a vocal opponent of same-sex relationships and of liberal abortion laws, which it claims motivated the bank’s decision to close down the bank account. As is the case with Coutts, however, the true picture is not clear, and the Bank of America denies the allegations, maintaining that IAM’s account was closed due to the charity’s involvement in debt collection activities on behalf of its beneficiaries.
We at Moneyzine.com investigate the rise of debanking and look at what UK consumers can do if they find that their accounts have been closed.
Which Banks Have Debanked?
The FCA published a report in the middle of September finding ‘no evidence’ of customers being debanked as a result of their political views. However, the FCA later admitted that the data had been collected very quickly and that further work would be needed in order to ‘be sure’, and this has certainly not pacified Nigel Farage, who has publicly accused all banks of consciously debanking customers. It remains to be seen whether the specific allegations against Coutts will be made good, but the consequences have already been felt by Coutt’s parent company, NatWest, whose CEO, Dame Alison Rose, lost her job over the row that ensued.
In the United States, many customers are finding that their accounts have been frozen or closed unexpectedly. One of the largest culprits is, as noted above, believed to be the Bank of America, which filed 1.4 million “Suspicious Activity Reports” in 2021 – a 69% increase on the 830,000 reports in 2014. Criticisms of the banks have also come down from high political office, with Republican attorney generals across 19 US states recently accusing JP Morgan of persistent discrimination against customers and of closing bank accounts without warning due to religious and political motivations.
Which Banks Won’t Debank?
Senior executives from a number of banks have recently met with City Minister, Andrew Griffith, to give a personal commitment to uphold customers’ freedom of expression. Those in attendance represented Barclays, HSBC, Lloyds, Santander, Nationwide and NatWest.
There is, in any event, a significant prospect of legislative intervention coming down the tracks to prevent any institution from debanking in the future. Nigel Farage’s experience prompted him to call for a royal commission to investigate the debanking crisis and to demand FCA intervention, and more recently at the October’s Conservative conference, finance minister Jeremy Hunt vowed to tighten banking rules in order to ensure that customers could not have their accounts closed simply on the basis of their political views. The legislation is due to be published by the end of 2023, and would reach the stage of parliamentary approval in 2024.
What Are Consumers’ Rights When They Are Debanked?
Legislative intervention is of course to be welcomed, but in the meantime the risk remains very real and in many cases customers will struggle to get answers about why their account has been closed, let alone prove definitively what motivated the bank’s decision.
So what should you do if you feel that you have been the victim of debanking? Our personal finance expert, Jonathan Merry, has these tips:
Nigel Farage’s account closure came as no surprise to many sex workers who claim that they are routinely debanked due to the nature of their work. Last year, as many as 40% of workers in the adult entertainment industry found themselves debanked. As a result, many have chosen to turn to cryptocurrency as an alternative. Unlike a bank account, cryptocurrency has the advantage of privacy and anonymity, which can suit workers within certain industries who fear that they may find their accounts shut down by high street banks. Cryptocurrency means no charge-backs, no website commission-fees and, most importantly, it shields the user from judgement calls about which transactions are acceptable.
At the moment, debanking is a legal grey area. Banks operate as private entities and are not obliged to offer their services to the world at large. However, UK banks are not free to make decisions which lead to the unequal treatment of customers or potential customers on the grounds of “protected characteristics”, which include race, religion and most political beliefs. If you feel that discrimination on one of these grounds is the root of your account closure, it is important to raise a formal complaint promptly and in writing. It can be difficult to prove precisely what motivated a bank, but aggrieved customers are encouraged to provide details of their account closure to the website Accountclosed.org. As more and more complaints are logged, a picture may begin to emerge which could help with future legal and regulatory action.
Immigrants who regularly receive money from overseas, or who consistently send large amounts of money abroad, also run the risk of being debanked. Instead of using a high street bank for such transactions, customers should look to money transfer websites, which can provide an alternative, more confidential and often faster means of sending money abroad. As a bonus, they typically offer better exchange rates and lower fees than most banks.
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