Some financial groups are having their banking facilities withdrawn at short notice as high-street banks seek to cut down on possible money-laundering routes.
Money-service businesses, which include online payment services and pre-paid cards, have been identified as a money-laundering risk by the UK Serious Organised Crime Agency.
Banks are now moving swiftly to distance themselves from the sector, with HSBC set to quit following the money-laundering storm, and Barclays giving a host of companies – including long-term customers – two months to find another bank.
Last year, HSBC set aside $2 billion for fines, saying in July that it had sidelined $700 million to cover money-laundering accusations in the US.
The bank said it had recouped bonuses paid to staff responsible for the security lapses in the North American arm of the business that had made it vulnerable to money laundering activity (read more).
But money-service businesses are now at risk of operating illegally if they cannot find alternative banking facilities, as they are required to operate business bank accounts to hold deposits.
HSBC was heavily fined for security lapses that enabled money-laundering in North America.
Defending their position, banks have said that the risk of fraud is high, and that they are simply cutting down activity where the businesses don’t have adequate filters in place to root out illegal transactions.
“The regulatory regime requires robust policies and systems, and we work with our customers to ensure they have these controls in place,” said a spokesperson from the Royal Bank of Scotland.
The Prepaid International Forum (PIF), which represents a number of money-service businesses, has reported the banks’ decisive actions to the Financial Conduct Authority.
The PIF expressed its concerns that the shrinking competition in the market will put firms at the mercy of a small number of large banks who will dominate the sector.
James Booker
Which4U
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