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Report Recommends Reducing Red Tape for Banks to Avoid Mass Debunking or Paying Fees


The Institute of Economic Affairs has stated that banks are being compelled to close accounts due to the excessive cost of adhering to regulations.

A think tank has urged the government to either reduce regulatory red tape or compensate banks to prevent a “debanking epidemic.”

As per a report published by the Institute of Economic Affairs (IEA) on May 16, banks are being forced to close thousands of innocent customers’ accounts due to the high costs of complying with anti-money-laundering (AML) regulations.

The report acknowledges that while banks have the freedom to disassociate themselves from customers they prefer not to serve, being mandated by the government to act as crime fighters often leads to assumptions of guilt as it may not be financially viable to ascertain innocence.

Based on figures obtained through a Freedom of Information request to the Financial Conduct Authority, the IEA revealed that UK banks closed a total of 343,000 accounts in the year 2021/22, a significant increase from 45,000 in 2017 following the enactment of the Money Laundering Regulations.

The report highlighted that many account closures were due to the banks’ inability to meet the MLR standards and verify customers’ innocence to comply with regulations, given the potential consequences of non-compliance.



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