ANALYSIS: Is the De-Banking Problem Solvable?

Undated file photo of a smashed piggy bank. (Anthony Devlin/PA)

Coutts Bank’s 40-page dossier on Nigel Farage has shone a light on the nagging suspicion that banks may have been dropping customers over political views the banks have deemed unfavourable.

The high-profile de-banking of the broadcaster and former UKIP and Brexit Party leader has led to an apology from the bank’s boss, and the Treasury has announced plans to tighten the rules around accounts closure.

A financial lawyer told The Epoch Times that banks are private businesses, and apart from tinkering around transparency rules, not much can be done to stop banks from certain accounts unless they are re-nationalised.

A human rights lawyer said that the UK would no longer be a democracy if banks have the power to bar people from the banking system over their views or political affiliation and that banks should have to prove their own rules are enforced fairly across the board.

An investment manager said the free market can offer the solution; while some banks want to distance themselves from certain customers, other banks ought to be able to step in.

Banks Close Accounts

While the controversy over Mr. Farage’s bank account closure is around the discrimination of political views, the issue is much wider.

Under current rules, just like customers can choose which banks to put their money in, banks are also free to refuse service without giving a reason, although they are normally expected to give at least 30 days of notice. The rules are expected to change under proposals announced by the Treasury in July.

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Fraudsters can be shut out of their accounts without notice; however, this also affects customers mistakenly suspected of committing fraud. Some may then be quietly flagged on anti-fraud databases and find it difficult to open an account elsewhere or get other financial services such as a mortgage or an insurance policy.

According to preliminary figures given to The Epoch Times, in the past three financial years, the Financial Ombudsman Service (FOS) received some 1,300 customer complaints related to bank account closures each year, and in about a quarter of the cases, the complaints were upheld.

Besides fraudsters, certain occupations and industries deemed to be riskier are also less favoured by high street banks.

Politically exposed persons (PEPs) are subject to heightened scrutiny under EU rules that were incorporated into British law. Politicians have been complaining for years that they and their families had bank accounts closed because of their careers.

PEP checks also apply to areas outside of everyday banking. Tim Price, director of wealth management firm Price Value Partners, told The Epoch Times that some investment platforms would “raise red flags” over PEPs.

Tim Thomas, director of law firm Richardson Lissack and head of the firm’s financial services regulatory department, said law firms would also conduct due diligence checks on clients, including sanctions checks, PEP checks, and a history check using a “very detailed questionnaire.”

Besides PEPs, vendors of high-value goods such as watches often have no choice but to use challenger banks because high street banks don’t like the risks involved, Mr. Thomas said.

And in another recent case, he said, a Russian-born British citizen, who moved to the UK 30 years ago, was told by his bank of 25 years that they didn’t want his business anymore.

According to Mr. Thomas, the client didn’t have any financial interest in Russia.

“I think the bank has panicked because he’s got Russian connections,” he said.

The defence industry is another group that struggles with banks and financial services. The industry is also struggling to pinpoint the exact reason, but it’s believed environmental, social, and governance (ESG) ratings may have played a major role.

Political Views

The FOS told The Epoch Times that it doesn’t have any data on whether consumers’ personal views were a factor that contributed to banks’ decisions to close accounts.

In recent years, there are a number of media reports on anecdotal evidence of account closures by banks and financial services that were suspected to be based on political views, but Coutts was the first bank that came close to admitting it.

In 2022, Paypal shut down the account of Us for Them, a parents group campaigning against school shutdowns and other COVID-19 rules, and three accounts associated with Toby Young—his personal account and the accounts of the Daily Sceptic and the Free Speech Union, triggering an exodus from the payment service in protest. Paypal later restored the accounts.

Earlier this year, Reclaim Party leader Laurence Fox claimed on X, formerly known as Twitter, that his party, first registered in 2019, had not been able get a UK bank account and that he had been denied a mortgage by major lenders.

According to the Times of London, a church leader lost his Yorkshire Building Society (YBS) account after telling the building society, which had displayed support for so-called Pride Month on its website, that he didn’t agree with pushing transgender ideology on children. YBS said they would close an account only “if a customer is rude, abusive, violent, or discriminates in any way.”

Earlier this month, the founder of gender-critical parents group Our Duty said a Metro Bank manager told him by phone that the group could not open a business account because its belief is in conflict with the bank’s culture. And in a subsequent email that made no mention of the alleged phone call, the bank said its policy didn’t “allow organisations to receive donations if not a registered charity, and for community groups to be linked to, or influence political policies or legislations.”

Triggernometry, a British YouTube show and podcast featuring interviews and satirical content about current affairs and social issues, also lost a bank account recently. Co-host Konstantin Kisin has claimed that the bank cited their reception of donations as a reason.

In the case of Mr. Farage, the BBC initially cited an unnamed source suggesting he didn’t meet Coutts’ financial threshold, but a 40-page document, which Mr. Farage obtained by filing a subject access request, showed that it wasn’t the case.

The document, published in the Mail Online, includes meeting minutes from the bank’s Wealth Reputational Risk Committee dated Nov. 17 last year that read, “The Committee did not think continuing to bank [Nigel Farage (NF)] was compatible with Coutts given his publicly-stated views that were at odds with our position as an inclusive organisation.”

The minutes went on to say that this was “not a political decision but one centred around inclusivity and purpose.”

Elsewhere in the document, it was said Mr. Farage’s views were not in line with the bank’s purpose specifically regarding “ESG/Diversity and inclusion.”

According to the minutes, the committee decided to “exit” Mr. Farage when his mortgage expires in July this year, or accelerate the process if an external team tasked to do monthly adverse press checks on him found things that amplify “the reputational risks associated with banking NF.”

The document also said the allegations of Mr. Farage’s Russian links were unfounded, there was no evidence of regulator or legal censure of him, and that he had been downgraded to the lower-risk category in relation to PEP checks after he left politics.

Coutts stated in July that it doesn’t close accounts “solely on the basis of legally held political and personal views” but takes decisions involving “a number of factors including commercial viability, reputational considerations, and legal and regulatory requirements.

Besides Mr. Farage’s high profile, the case was also controversial because Coutts’ owner, NatWest, is still partly (38.6 percent) owned by taxpayers following the emergency bailout in 2008.

Asked about rules over financial threshold and donations before the Coutts dossier was published, Mr. Thomas told The Epoch Times some banks do have these rules.

In response to a question about whether they are enforced fairly, he said, “The short answer is, ‘Who knows?’”

Mr. Thomas explained that bank accounts are contracts between customers and banks and that the terms and conditions are “incredibly biased in favour of the bank.”

What Can Be Done

An FOS spokesperson said in an email to The Epoch Times: “Account closures should always be carried out in line with the bank’s terms and conditions. If consumers are concerned that they haven’t been treated fairly, they should contact the Financial Ombudsman Service and we'll see if we can help. We are a free, independent service set up to resolve financial disputes informally and fairly. Each case is investigated on its own merits.”

Another way to potentially find out why an account is closed is to file a subject access request, as Mr. Farage did.

According to the Information Commissioner’s Office, people “have the right to ask an organisation whether or not they are using or storing your personal information.”

The office added that one can as an organisation for copies of personal information verbally or in writing, including via social media.

However, banks rarely reverse their decision to close an account even if they were found to have done so wrongfully. In cases published by the FOS, customers were often paid £100 as compensation.

Stopping De-banking

The de-banking of people with certain political views has triggered a debate over free speech.

Announcing plans to change the law, economic secretary to the Treasury Andrew Griffith said that “freedom of speech is a cornerstone of our democracy, and it must be respected by all institutions.”

Under the government’s plan, the notice period for account closures will be extended to 90 days and banks will be forced to explain the reasons.

But it’s unclear how much the new rule can deter banks from dropping customers over PEP rules or “reputational risks.”

Regarding PEP rules, Mr. Thomas said he believes they are “probably not stringent enough” and shouldn’t be loosened.

Banks have to weigh up the risks, he said. “This person might want to bank with us and they might have a lot of money, but where does that money come from? How much due diligence can we do on it to satisfy this is clean money, and it’s not come unlawfully out of some other jurisdictions?”

And he said he isn’t optimistic about stopping banks from de-banking people.

In theory, “you could re-nationalise banks,” he said. Besides that, “you could argue that there needs to be more transparency.”

Mr. Price said that, unlike other private businesses, a bank is almost like a utility business these days.

“You can’t exist without water and for almost similar reasons you can’t really exist without a bank account.”

Asked about the difference between a bank withholding services and a Christian baker refusing to make a cake for a gay wedding, Anna Loutfi, barrister and head of legal at the Bad Law Project, told The Epoch Times that baking a cake for a gay wedding would amount to “showing solidarity with that message,” while banks are not asked to subscribe to their customers’ political views.

“It’s not a reflection on Barclays, HSBC, or NatWest if that person goes off and has a political career or political message with which the bank is not comfortable, because we’re not asking the bank to subscribe to it,” she said.

Asked about potential solutions, Ms. Loutfi said, “I suppose pressure has to be put on the banks to show that they are operating this system impartially in respect of all individuals, but if they’re only selecting certain people, then there’s a problem.”

Mr. Price agreed that transparency would help and suggested that the banking system “should under its own steam” create a process whereby they can’t unilaterally de-bank someone because a committee “doesn’t give someone the seal of approval,” and a charter “whereby they articulated exactly for what reasons they may elect to decline someone’s business, and that should be a matter of a public record.”

A free market solution “would be the best,” he said. “If Bank A refuses to deal with you, then Bank B steps in and replaces them.”