Regulators share charities’ concerns about withdrawal of banking services
The Financial Action Task Force, a body established by the G7 to put in place policies and recommendations for governments to counter money laundering and terrorism financing, has included a whole chapter on this issue in the recent revision of its best practices paper http://www.fatf-gafi.org/media/fatf/documents/reports/BPP-combating-abuse-non-profit-organisations.pdf (June 2015, see page 28).
Concerns have also been raised by the UK Government’s independent reviewer of counter-terrorism laws, David Anderson QC, in comments to a parliamentary committee on banking issues in December 2014: http://www.parliament.uk/documents/joint-committees/draft-protection-of-charities/evidence-volume-protection-of-charities.pdf.
Mr Anderson says: “I would love to know the answer to the de-banking question. I have touched on this in a couple of my reports; it seems to me an area where really no one feels any responsibility. The banks, perfectly rationally, do not want regulatory risk; they do not want reputational risk, and therefore they withdraw facilities because no one forces them to offer facilities.
“The Government are happy to tell you that this is a matter for the banks and not a matter for them. As I understand it, there is no universal service obligation, as there is, for example, for telecommunications or water or something like that. People can and do fall through the net. There are other solutions you could envisage. I believe that in France, for example, the Government have the power to direct a bank to offer services.”
Also, the Financial Conduct Authority Positive has distanced itself from the de-risking approach of banks in a statement on 27 April 2015: https://www.fca.org.uk/about/what/enforcing/money-laundering/derisking . It says: “We are clear that effective money-laundering risk management need not result in wholesale de-risking. We require banks to put in place and maintain policies and procedures to identify, assess and manage money-laundering risk. These policies and procedures must be comprehensive and proportionate to the nature, scale and complexity of the bank’s activities.
“They should help banks identify the risk associated with different types of customers and inform not only the level of customer due diligence measures banks apply but also their decisions about accepting or maintaining individual business relationships. This requires banks to use judgement and common sense and is what we would regard as an effective risk-based approach.”