Lenders must improve their behaviour over debanking: Regulator rules on Farage’s conflict with Coutts
Banks have been told they must do more to ensure MPs, members of the House of Lords and their families are treated fairly, after the City regulator launched an investigation into the Nigel Farage banking scandal.
All lenders could improve the way they vet an estimated 90,000 politically exposed persons (PEPs), who are considered vulnerable to bribery or corruption because of the public office they hold, according to the Financial Conduct Authority.
The review followed a row last year when Coutts, the private banking arm of NatWest, closed Nigel Farage’s account.
‘Debanked’: Reform Party leader Nigel Farage (pictured) claimed he was targeted because of his political views
The Reform Party leader said he had been “debanked” because of his political views, and was handed a memo from Coutts calling him a “disingenuous conman” whose views did not match those of the bank.
An independent investigation found his account was closed primarily for commercial reasons, but the affair cost NatWest chief executive Alison Rose her job.
The scandal also raised wider concerns about the way customers, such as charities and small businesses, are treated when their accounts are closed.
Last year, The Mail on Sunday reported that lenders were closing almost 1,000 accounts a day, seven times the number in 2016. The anti-money laundering approach is based on the principle of ‘respond first, ask questions later’.
Nearly all accounts were closed due to concerns about ‘financial crime’. In some cases, lenders are legally prohibited from telling customers why they have been ‘debanked’.
After the 2008 financial crisis, stricter anti-money laundering rules were introduced to make banks safer.
But the Institute of Economic Affairs estimates that enforcing them costs banks £34bn a year – almost double the UK police budget – despite no evidence the measures reduce crime.
Although PEPs are subject to additional checks, the FCA has stated that banks must not discriminate against people who are running for office or holding a senior position.
‘Of course, providing a public service means more scrutiny, but it has to be proportionate,’ said Sarah Pritchard, the FCA’s executive director of markets. ‘Most firms are trying to do well, but there is more they can do.’
A “small number” of the 15 firms assessed by the FCA are being further investigated “to ensure they implement changes”, the FCA said. The publication of the report was delayed due to the general election.
Last night, the FCA was accused of publishing its findings while Farage was attending the US Republican Party convention.
It was “striking” that the report was published at a time when “Farage was unable to respond,” said Andy Agathangelou, founder of the campaign group Transparency Task Force. He added: “It’s almost as if the timing was carefully chosen to minimise the chance of challenge.”
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