The Government has published its response to the Council of Financial Regulators (CFR) advice on potential policy responses to de-banking. Background.
De-banking occurs when a bank declines to provide banking services or withdraws banking services from an existing customer and is driven by a number of inter-related causes, including Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws, sanctions compliance, profitability and reputational risk considerations.
The Government has expressed its commitment to balance support for affected businesses, while also acknowledging banks are commercial enterprises and must manage their own risks and resources.
It supports in principle the CFR’s recommendation that all banks implement five related measures to improve transparency and fairness in relation to de-banking. These measures would apply to all instances of de-banking.
The five measures proposed are:
Measure 1: That banks document reasons for de-banking a customer;
Measure 2: That banks provide a customer with reasons for being de-banked;
Measure 3: That banks ensure a de-banked customer who is an individual or small business has access to their Internal Dispute Resolution procedures;
Measure 4: That banks provide a minimum of 30 days’ notice before closing existing core banking services of a customer. This account closure notice should also inform the customer that they may access the bank’s Internal Dispute Resolution procedures; and
Measure 5: That banks self-certify adherence to measures 1–4.
The Government also expects banks to communicate their requirements to both existing and potential customers clearly and proactively prior to refusing or withdrawing banking services. The Government also encourages the major banks to publish information on their requirements and risk tolerance of the digital currency exchanges (DCE), FinTech and remittance sectors.
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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
