Lenders must clean up their ways in de-banking: watchdog delivers verdict on Farage row with Coutts

Banks have been called on to do more to ensure MPs, peers and their families are treated fairly following a review by the City watchdog in the wake of Nigel Farage’s debanking case.

The Financial Conduct Authority said all lenders could improve the way they monitor around 90,000 politically exposed people (PEPs) deemed vulnerable to bribery or corruption because of the public office they hold.

The review followed a row last year when Coutts, NatWest’s private banking arm, closed Nigel Farage’s account.

The reform party leader said he had been “de-banked” because of his political views. He received a memo from Coutts calling him a “hypocritical fraudster” whose views did not match those of the bank.

An independent review found her account had been closed primarily for business reasons, but the affair cost NatWest chief executive Alison Rose her job.

The scandal also raised broader concerns about how customers, such as charities and small businesses, are treated when their accounts are closed.

Last year, The Mail on Sunday revealed that lenders were closing almost 1,000 accounts a day – a sevenfold increase on 2016 – in a “shoot first and ask questions later” approach to comply with anti-money laundering rules.

Almost all accounts were closed due to fears of “financial crimes.” In some cases, lenders are prohibited by law from informing customers why they have been “unbanked.”

Following the 2008 financial crisis, stricter anti-money laundering rules were introduced to make banks safer.

But the Institute of Economic Affairs estimates that enforcing them costs banks £34bn a year – almost double the UK’s entire police budget – despite no evidence that the measures reduce crime.

Although PEPs are subject to additional controls, the FCA said banks should not disadvantage people running for office or taking on senior roles.

“Public service naturally brings with it greater scrutiny, but it must be proportionate,” said Sarah Pritchard, executive director of markets at the FCA. “Most firms try to get it right, but they can do more.”

A “small number” of the 15 firms reviewed by the FCA face closer scrutiny “to ensure they make changes”, it said. The publication of the report was delayed due to the general election.

Last night the FCA was accused of issuing its findings while Farage was attending the US Republican convention.

“It was ‘remarkable’ that the report was published when ‘Farage is in no position to respond’,” said Andy Agathangelou, founder of campaign group Transparency Task Force, adding: “It’s almost as if the timing had been hand-picked to reduce the likelihood of being challenged.”