Should a bank be able to close your accounts because it disagrees with your political views? That question exploded into Britain’s national debate thanks to right-winger Nigel Farage, after elite bank Coutts closed his accounts.
The conflagration has important lessons for SA, where the issue of banks’ rights to close accounts has been burbling through the courts and regulatory circles. It may even lead to change in the rules of the Financial Action Task Force, which in 2022 greylisted SA over enforcement of international money-laundering rules.
In the UK, it has emerged that Coutts decided to “exit” Farage because his views “do not align with our values”, citing his relationship with Donald Trump, his reputation for being “xenophobic and racist”, and comments against LGBTQ+ rights, among other things.
The ensuing imbroglio led to the CEOs of Coutts and its parent company NatWest resigning, a summonsing of 19 CEOs of the UK’s banks to explain to the UK Treasury how they “debank” people, a rushing of new regulations on account closures and the chancellor of the exchequer calling on the Financial Conduct Authority to investigate the practice in the industry.
That may lead to fines for banks, because — and the irony will be dripping — regulations require that financial institutions do not discriminate against people in terms of the EU Charter of Fundamental Rights, which includes protection of political opinion. Farage, a prominent Brexit campaigner, called repeatedly for the EU charter to be scrapped.
Farage has now launched a website to collect reports from other people who were debanked, which it turns out ranges across the political spectrum, including embassies of smaller countries in the UK. Politicians of the Left and Right have taken to the media to share their difficulties in getting banking services as “politically exposed persons” (PEPs).
Banks’ enthusiasm for closing accounts is understandable. On the one hand, they have been forced to police account activity for anything illegal. FATF sets clear rules for compliant countries. Among those is the requirement that banks undertake enhanced due diligence on anyone considered a PEP. Those rules are embodied in SA law through the Financial Intelligence Centre Act.
Banks are required to judge the risks of a client being engaged in illegal activity and withdraw services accordingly. Failures to do so can result in large fines. Allied to that, banks have regulatory responsibility to protect their reputations, which includes doing business with counterparts engaging in activities that could embarrass the lenders. Banks may well interpret embarrassment to include clients drilling for oil or advocating LGBTQ+ discrimination. One can imagine Coutts reputational risk committee fearing a headline such as “Coutts happy to bank xenophobic homophobe Farage”.