The UK government has proposed new rules aimed at increasing transparency in the process of bank account closures. Under these proposed regulations, banks would be required to provide a 90-day notice period to customers before closing their accounts, along with an explanation for the closure. Currently, banks are only obligated to give a 30-day notice period.
This move is part of a broader effort to empower customers and enhance their rights, particularly in cases where account closures have raised concerns, such as those involving politically exposed persons (PEPs). The aim is to offer customers more information and an opportunity to appeal account closure decisions.
The Financial Conduct Authority (FCA) has also been instructed to review its existing guidance on managing the risk associated with PEPs as part of the Financial Services and Markets Act 2023. The results of this review are expected to be released in September 2023.
However, experts have noted the potential conflict between customer rights and banks’ anti-financial crime obligations. They caution that banks should carefully consider how to implement these new requirements to avoid undermining their anti-money laundering (AML) obligations and the effectiveness of their AML measures.
Balancing customer rights with AML and counter-terrorist financing (CFT) obligations is an ongoing challenge for banks. Effective risk management programs must address both the rights of customers and legal obligations to prevent financial and predicate crimes. One-size-fits-all approaches are often ineffective, and firms need to tailor their risk management strategies to their specific needs.
In response to these proposed changes, firms are encouraged to stay informed about legislative developments and understand when exceptions to transparency requirements may apply. In cases of perceived conflicts, firms can seek guidance from their legal teams and relevant regulators. Additionally, firms may choose to update their enterprise-wide risk assessments to assess their specific risks and ensure a targeted approach that minimizes the impact on legitimate customers.
By FCCT Editorial Team
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