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Should a bank close a customer’s account because they disagree with their views?

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From The Times:

‘Until last summer, Nigel Farage had dealt with the same relationship manager at Coutts for years. Then Mark Pierce left for the rival private bank Arbuthnot Latham, and responsibility for the outspoken Brexiteer’s accounts passed to a Coutts executive named Min Fung. The former Ukip leader’s first conversation with Fung was also his last. “A few months into the so-called relationship, he rang me to say, ‘We’re closing your accounts’,” Farage told The Sunday Times. “I said, ‘This is clearly because I’m a politically exposed person’. He said everything would be explained in a letter. The letter comes and it explains nothing — it just says, ‘Your accounts are to close, please be gone by X date’. ”

For those who have not been following UK politics, a big lesson has been learned in the last week: should a bank drop a client because they don't like their views?

The lesson has been brought to light by Nigel Farage. Mr. Farage was the instigator and architect of Brexit, the departure of Britain from Europe. He is also quite a clever and experienced financial markets player, and made a mint by shorting the UK pound back in June 2016, when he knew the result was in favour of the UK leaving the EU.

How much did Nigel Farage make out of #Brexit? - Chris Skinner's blog (thefinanser.com)

Making millions gave Mr. Farage the ability to open a Coutts account. Coutts is the ultrabank in the UK for high net worth individuals, and are bankers to Kings, Queens, celebrities and more. A bank that demands customers keep at least £1 million in investments or borrowing, or savings at £3 million or more. Owned by NatWest Group, it is the ultimate bank for the rich and famous of Britain.

Then, suddenly, we had a week of public media tennis between Nigel Farage and Coutts over the fact that they closed his account. It was almost like a Craig David song:

Monday, they sacked me

Tuesday, they denied me

Wednesday, I lawed them

Thursday, they fezzed up

Friday, we made up

Saturday, we argued and then

We faced off on Sunday.

So, what’s been going on?

Well, it all started on July 4th, when Nigel Farage announced that Coutts had kicked him out.

Nigel Farage’s Coutts bank account closed due to lack of funds | The Guardian

The private bank Coutts is understood to have shut Nigel Farage’s bank account after he fell below the prestigious lender’s wealth requirements, raising questions over the Brexiter’s claims that the bank was targeting him over his political views.                  

The way this was framed is that Mr. Farage lacked the funds to maintain his high net worth status with the bank. Then the bank made things ten times worse by sharing Mr. Farage’s private banking details with the BBC.

​Nigel Farage furious and 'seeking legal advice' after Coutts bank 'gave BBC his bank details' (gbnews.com)

He said: “Quite why a bank thinks ethically or legally they can discuss anything about my financial affairs with the BBC and a wider audience is totally and utterly beyond me", and added that the scandal prompted many people to come forward saying they had an account with Coutts, whilst being below the one million pound current account limit.

Something fishy here?

The thing is – bearing in mind that Mr. Farage made Brexit happen and is a high profile figure – he is not a guy to take lightly. Launching a media offensive against Coutts Bank, Mr. Farage asked them why they got rid of him? Mr. Farage gained access to a report by the bank's wealth reputational risk committee, via a subject access request, and this gave away the real reason: his political views.

Nigel Farage: Coutts document 'shows bank account shut over my views' - BBC News

According to minutes of a meeting of Coutts' wealth reputational risk committee held on November 17 2022, they read: “The committee did not think continuing to bank NF [Nigel Farage] was compatible with Coutts given his publicly-stated views that were at odds with our position as an inclusive organisation. “This was not a political decision but one centred around inclusivity and purpose.” He also said there was a perception that he was regarded as “racist and xenophobic”.

I wonder if that could be because he is racist and xenophobic. Just checkout these 13 tweets by Mr. Farage as identified by The Telegraph and you see why.

The 13 tweets that cost Nigel Farage his Coutts bank account (telegraph.co.uk)

Oh and, of course, Mr. Farage had to claim that the EU was to blame.

Nigel Farage: EU to blame for my bank account woes | The Independent

Arch-Brexiteer Nigel Farage has blamed EU rules “madly adopted” by the UK for being denied accounts with several banks. The former Brexit Party and Ukip leader sparked a major row after claiming his account with Coutts was shut down because he was a ‘politically exposed person’ (PEP).

But the core question here is whether a bank should stake a position for or against a customer, based on the customer’s political views? The overwhelming answer from the powers that be is NO, and the result is that the bank’s reputational risk committee has placed the bank’s reputation at risk.

Coutts’ reputation committee has destroyed its own reputation  | The Spectator

“Nigel Farage has been cancelled by his bank because their reputation risk committee doesn’t approve of his political views and has branded him a ‘chancer’ and ‘grifter’ … NatWest and Coutts have jumped on the reputation bandwagon but fundamentally misunderstood what reputation is and how it works. The minutes of their ‘wealth reputation risk committee’, revealed in Farage’s data access request, reveals not only an organisation in the grip of trendy woke ideology, but no clue about its own reputation and how to manage it.”

The Guardian makes the issue even clearer:

Farage affair is ‘a monumental PR disaster’ for exclusive bank Coutts | The super-rich | The Guardian

“For 331 years Coutts’s reputation for guaranteeing the utmost discretion made it the bank of choice for the rich and famous – including King Charles and every member of the royal family since George IV. Now Coutts finds itself a very high-profile target in the latest UK culture war, following a decision to cut ties with its former customer Nigel Farage, after a review by its wealth reputational risk committee decided that his views ‘did not align with [the bank’s] purpose and values’. The affair, say crisis management experts, risks ‘destroying Coutts’s reputation, if not its entire business’.

“‘It is a monumental PR disaster – entirely of the bank’s own making – that will go down in history,’ said Justin Doherty, chair of the reputation risk advisory firm Hemington. ‘This once cherished national institution that rich and powerful people relied upon has been caught with its pants down.’”

The result of the ensuing furore was two-fold. First, an unreserved apology from the head of NatWest Group, CEO Dame Alison Rose, and a new government policy that banks could lose their licences if they close customers’ accounts over their political views.

The whole thing has brought to a head the thorny issue of who should be banked? Should we only bank those with the highest morals whose views concur with our own, or bank anyone, anywhere, anyhow? Equally, how to comply with all of the anti-terrorism rules, FATF, KYC and AML? Who are PEPs (Politically Exposed People) and why? Add to all of this that the government’s knee-jerk reaction to the bank’s faux-pas is to say they cannot ban customers over political views and, to top it all off, the government itself could be breaking its own laws!

The UK 2015 payment account regulations state that banks cannot discriminate who they bank based on views of their “nationality or place of residence”, and cannot apply “any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited.”

More importantly, if this law is changed so that banks are forced to inform customers why their account has been closed, then this would conflict with the above law, as banks are not allowed to tell a customer they suspect financial crime. That would be ‘tipping off’ the customer, and is an offence with a maximum five year sentence.

Hey-Ho, isn’t this system so simple?

The result of all of this is a general review of bank behaviours with the City Minister, Andrew Griffith, calling all banks to appear before him, warning that the government is prepared to “take the action necessary” to protect freedom of speech. Andrew Griffith has asked the banks to give their assurance that customers “can access payment accounts without fear of being de-banked for their lawful expression”. This follows three more banks being caught up in de-banking customers for their views.

City minister summons UK bank bosses to discuss Farage account closure | Politics | The Guardian

Treasury investigating three more banks over concerns accounts were closed for political reasons (telegraph.co.uk)

This may run on for some time.

 

UPDATE JULY 26

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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