Aren’t banks clever? If you think about all the things we take for granted that they do — the ability to move funds in seconds, how we can access our accounts instantly any time of day or night and take money out anywhere on the planet — it really is staggering. Only it’s all now become a little too easy, a little too fast, and banks are slowly starting to shackle the whole system. That’s entirely for their benefit, of course, not ours, and it is happening because they are in trouble.
The specific problem is money laundering rules. If you’ve followed our coverage you will have seen how banks have been kicking customers out of their accounts and imposing limits on online transfers. Our reports have even sparked an investigation by the Treasury select committee.
This is all going to start affecting you too. When you want to make a large transfer, buy a house, open an account, you will notice more onerous questions about the source of your funds.
A colleague told me this week how he could not buy a house because his deposit came from his parents in France. The bank said he had to keep the cash in a UK account for at least six months before it might be accepted.
And you may find rules on money laundering catching up with you on old accounts that were opened without the paperwork that is now expected.
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The banks have got themselves in a right mess over money laundering, largely because of fraud, but also cryptocurrencies. They have realised billions are passing through accounts and they don’t know where the money has been. Quite why banks did not see the risk of bitcoin earlier is beyond me. It was totally evident that it was unsustainable to let customers move their money on to anonymous trading sites and then back again without any proof of where it had been.
The regulator finally began getting tough last year, asking some serious questions about just how well the banks really knew their customers and where their funds were coming from.
Then the Wirecard scandal broke which showed how little diligence some firms had done, and they became really nervous. Next the Financial Conduct Authority, the City regulator, announced it was to prosecute NatWest over money laundering failings, and finally it sent a stern letter to all the chief executives warning them to crack down.
Banks are in a fluster. No one wants to be found to be facilitating the sex trade, organised crime or migrant trafficking, which is where the proceeds of fraud and money laundering often end up.
Those affected most by this are customers with unusual circumstances like the Pomeroys who we feature today. Think of how the unrelenting sacrifice entailed in raising a seriously disabled child affects their ability to work, live a normal home life, and how much paperwork and extra cost they incur.
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The kindness of hundreds of strangers gave them £80,000 to help adapt a house suitable for their family’s needs. But partly because of money laundering rules they can’t use that cash to buy a house. The banks want to know the exact source of the funds and the Pomeroys can’t trace it back to every single person.
The banks could easily find a solution to this problem, but in our buoyant mortgage market it is only those with large deposits and full-time jobs who get first-class service. So red tape and, let’s face it, past incompetence has added to the Pomeroys’ already enormous burden.
They’re not asking for anything free of charge, they just want some understanding of their personal circumstances. Banks are supposed to be packed with brilliant problem solvers but at the moment the issues with money laundering are growing. Customers can’t get any answers, so maybe MPs need to call in the bosses to get some answers on their behalf.
We are all having to pay the price for the banks’ inability to grapple with fraud and cryptocurrencies for years.
Perhaps they’re not so clever after all.
