The Telegraph, September 5 2023, Barnabas Reynolds
The recent controversy over the de-banking of Nigel Farage has provided an unusual insight into shortcomings in our approach to financial regulation. Banks control who they do business with, and competitive pressures generally mean their decisions are apolitical.
However, it is apparent that vague, all-encompassing rules, obfuscatory and duplicative obligations, and competing high-level goals delegated to the private sector are encouraging bank managers to indulge in politics under the guise of compliance. In this case, it led to a de-banking by the highly esteemed Coutts bank of someone with whom they disagreed.
Sarah Pritchard, executive director at the Financial Conduct Authority, has now said that the regulator will “act” if banks are seen to be treating customers unfairly by being “more tick-box than risk-based”. This is a welcome step, but should not be the only one.
The de-banking fiasco has provided us with a vital lesson for how regulation should now be adjusted in order to properly support a competitive UK economy.
Part of the issue appears to be anti-money laundering (AML) legislation inherited from the EU. Under these rules, “politically-exposed persons” (PEPs), including UK politicians, are to be treated as high-risk, requiring additional diligence as to their source of funds.
These provisions apply alongside ethical instructions and generic rules, issued by our regulators, without the benefit of case law precedent. The result of this mixture has been to propel our banks into addressing matters that potentially include political choice, based on material including partial indications and innuendo.
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