De-banking

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De-banking, also known within the banking industry as de-risking, is the closure of people's or organizations' bank accounts by banks that perceive the account holders to pose a financial, legal, regulatory, or reputational risk to the bank.

Contents

Examples of this include the enforcement of anti-corruption and anti-money laundering laws, the closing of bank accounts of sex workers, [1] and people considered to be politically exposed persons. [2]

The closure of accounts is generally performed without giving a reason and without the prospect of appeal. De-banking can have severe consequences for individuals, as it cuts them off from many activities in society.

By country

United Kingdom

Following the Nigel Farage Coutts bank scandal in 2023, in which Coutts & Co. removed politician and broadcaster Nigel Farage as a client, the UK Government launched an investigation of de-banking practices within the UK banking industry. [3] The Financial Conduct Authority reported that banks in the UK were closing nearly one thousand accounts daily, with just over 343,000 closed in 2022, compared to about 45,000 in 2017. [4]

In September 2023, the FCA announced that it had found that banks had not been closing customers' accounts for political reasons. There had been four accounts that the FCA investigated for potentially having been closed for political reasons, but it found that the reason had actually been for the way the individuals had behaved towards the staff of the respective banks. Nigel Farage dubbed the outcome 'farcical'. [5]

Accusations of disproportionate de-banking of British Muslims have also resulted in calls for political scrutiny. [6] The British Nigerian community has been reportedly affected as well. [7] Poole-born Alexandra Tolstoy suspected that her account might have been closed by NatWest due to her Russian name. [8] [9] Baz Melia MBE accused NatWest of destroying his business by closing his and his family's accounts, which he suspected had happened because of a connection with a Saudi-based business partner. [10] Examples of companies being de-banked for trading with Ukraine were reported by British Ukrainian business groups. [11]

United States

Multiple instances of U.S. and Canadian banks reportedly dropping Muslim clients on questionable grounds have been covered in the media. [12]

Canada

In response to the Canada convoy protest of 2022, at least 76 bank accounts linked to the protests totaling CA$3.2 million were frozen under the Emergencies Act. [13]

See also

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References

  1. ↑ Gausden, Grace (2023-07-30). "'No one's account stays open for long': The rise of sex industry workers being de-banked". inews.co.uk. Retrieved 2023-08-01.
  2. ↑ Martini, Maíra (28 June 2023). "On politically exposed persons, de-risking and the fight against…". Transparency.org. Retrieved 2023-08-01.
  3. ↑ Venkataramakrishnan, Siddharth; Gross, Anna (2023-07-23). "Treasury to summon bank chiefs to address 'de-banking' after Farage furore". Financial Times. Retrieved 2023-08-01.
  4. ↑ Gani, Aisha S (16 August 2023). "British Muslims Say Banks Ruin Lives With Debanking Policies". Bloomberg.com.
  5. ↑ Dorrell, Chris (2023-09-19). "Banks not closing accounts due to political views, FCA finds". CityAM. Retrieved 2023-09-19.
  6. ↑ Scott, Jennifer (1 August 2023). "Banks accused of closing accounts belonging to British Muslims". Sky News. Retrieved 2023-08-01.
  7. ↑ Chowdhury, Sadiya; Hasnath, Mustakim (6 August 2023). "Unlawful 'de-banking' to be investigated - as specific communities warn of being disproportionately affected". Sky News.
  8. ↑ Bourne, Alice (5 July 2023). "'I don't know if it's because I have a Russian name': British aristocrat says her bank account was unexplainably closed". LBC.
  9. ↑ Johnston, Neil (4 July 2023). "Alexandra Tolstoy: 'NatWest closed my accounts, but never told me why'". The Telegraph. Archived from the original on 4 July 2023.
  10. ↑ Mendick, Robert (27 July 2023). "Decorated colonel faces ruin after NatWest shut accounts over Saudi links". The Telegraph. Archived from the original on 27 July 2023.
  11. ↑ Whale, Sebastian (15 August 2023). "UK banks shun companies trading with Ukraine". POLITICO.
  12. ↑ Emon, Anver M. (2023). "12. Moving Muslim Money". Systemic Islamophobia in Canada: A Research Agenda. University of Toronto Press. ISBN   9781487549138.
  13. ↑ "Canada protests: Police push back demonstrators in Ottawa". BBC News . 19 February 2022. Retrieved 2024-01-28.

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