Farage, resignations and banking transparency – what does it mean for AML services?

The recent furore around Nigel Farage’s banking habits has ignited a fierce debate on transparency. Should customers, as Farage argues, have a greater understanding of why their bank account has been shut? While some agree, citing a fairer outlook for consumers, others express concern at the opportunities it presents for criminals to pick holes in a lack of alignment. With further changes in the pipeline, how effective does that make current anti-money laundering (AML) restrictions?

It’s a timely question at a critical time for AML services, as the government ponders a reform to the Legal Services Act 2007. Could this prompt a rethink of how best to enforce legislation? Away from the posturing and political point scoring of the Farage saga, these important questions must be asked to ensure criminals do not exploit new banking rules at a time of significant upheaval.

Dominating column inches

The discussion became headline news when Coutts, an exclusive private lender that caters for royals and the global super-rich, closed the bank account of Farage last month. The Brexit campaigner claimed he had been unfairly snubbed for his political views, while the bank stated decisions are made due to “commercial viability, reputational considerations, and legal and regulatory requirements”. Farage dug further, however, and revealed a 40-page dossier that indicated his account had been closed as his views did not align with the firm’s “values”. In response, Farage declared: “My case is one clearly of discrimination.”

Members of government – including the Prime Minister Rishi Sunak – waded in, with the home secretary, Suella Braverman, accusing Coutts of “politically biassed dogma”. Soon after, Alison Rose, Chief Executive of NatWest Group, resigned due to breaking client confidentiality by passing on details of the closure to a journalist. Several apologies have since followed, and the government has moved quickly to ensure accounts are not terminated on grounds relating to “exercising the right to legitimate freedom of expression”.

Even before the recent commotion, concerns were being raised about whether plans to make closure of accounts more transparent may undermine measures against money laundering. While banks are only required to give customers 30 days notice before closing an account, the Treasury is now upping the period to three months in forthcoming measures, which have been accelerated since the Farage uproar.

Tipping off criminals

Currently, banks are not required to explain the decision behind shutting a customer’s account. Their explanations are often brief, usually to dampen any suspicion that the account holder may be under investigation or of interest to relevant authorities. This in keeping with the Proceeds of Crime Act 2002, which forbids banks from revealing any information to the user regarding a potential investigation.

Now, the Treasury is set to encourage banks to explain their reasoning when terminating an account, albeit still allowing them not to if there’s good reason. But the fear is that, if all customers but those under investigation receive explanations, the latter will suspect they may be the recipient of scrutiny and move to conceal their crimes within the extended three month window.

The argument from city minister Andrew Griffith is that it results in a fairer playing field for consumers but others have serious concerns. Despite Griffith urging firms “to take action on this policy as soon as possible and make best endeavours to implement” it, question marks remain over how to apply the new framework, potentially allowing criminals to exploit the confusion. It remains to be seen whether The National Crime Agency could lobby against the changes if they threaten to compromise investigations, too.

Where does this leave reform?

This could once again signal the lack of alignment between top-level officials, which often complicates the success of AML supervisions. Some officials believe that restrictions should be loosened in order to stimulate business while law protection argue they’re not enforced enough, sometimes resulting in muddled decision making. Critically, a united thought process is needed more than ever to choose and impose the most effective reforms of the Legal Services Act 2007.

Proposed changes to legislation are designed to tighten AML restrictions, with several options currently under consideration. Aimed at law firms, the reforms will remove ambiguity around compliance and solidify consistent enforcement. It’s a promising step if the correct legislation is selected.

However, like these banking changes, reform can not be rushed due to high profile cases or, crucially, political motivation. Appropriate consultation must be carried out and clarity, along with workable steps, provided to prevent uncertainty, which can be abused by increasingly sophisticated criminals. 

The bottom line

Farage may have plunged banking transparency back into the spotlight but his participation is also an unwelcome distraction from far more serious issues.

While he may paint himself as a victim of discrimination, his stance unwittingly threatens to dilute AML restrictions in the banking sector and divert focus from upcoming reforms to the Legal Services Act 2007. As a result, there is greater impact on those who experience the true consequences of financial crime; victims of human trafficking, fraud and terrorism.

First AML will be exhibiting at Accountex Summit Manchester on the 19th September 2023 on stand B15.

You can register for a free ticket here.

The post Farage, resignations and banking transparency – what does it mean for AML services? appeared first on Accounting Insight News.