Held to account

Ever been without a bank account? With the turbulence on the global financial markets over the past few days, not having a bank account probably seems like a pretty good idea. BBC Magazine looked at the difficulties of surviving in modern society on cash alone. The story touched only briefly on the concept of so-called “basic” bank accounts. These are designed for people who cannot open standard accounts because they have a bad credit rating or little money, but need to pay their bills by direct debit. In short, they are aimed at people living on benefits, which these days are paid direct into a bank account anyway.

Several years ago, I was offered a basic bank account. I wasn’t on benefits and already had several bank accounts. My problem was that I had just returned to the UK after over a decade abroad. And while I was living it up in Amsterdam, the world had changed. On 11 September, terrorists attacked the World Trade Center and one of the consequences was that global banking regulations were massively tightened everywhere. It transpired that Al Qaeda’s networks were moving money around the globe using thousands of small-scale ordinary current accounts and shifting only small sums of money so as not to attract attention.

The upshot was something called “Know Your Customer“, which required banks to verify the identity of all new and existing account-holders to satisfy the regulators that accounts were genuine and not being used for fraudulent purposes. All well and good. The problem was, and remains, that such due diligence hampers non-terrorists too and makes it very difficult for ordinary people to open a current account.

In 1998, after seven years abroad and certain that I’d never live in the UK again (note: never say never), I closed my last UK bank account. I didn’t need it any more, right? Wrong. Six years after that fateful act, with a relationship over and a voluntary redundancy, I packed my belongings and moved back to Britain. I moved in with my new partner and set about opening a UK bank account. This was the point that I entered an Orwellian nightmare. I couldn’t prove my identity.

To open a bank account, you have to produce a huge amount of paperwork that proves that you are who you claim to be. What exactly varies from bank to bank, but it generally consists of two items of photographic ID and five or six items of proof of address. My passport, British, was obviously good enough as an item of photo ID. My driving licence, with photo, had just been returned to the DVLA though. My Dutch ID card and residence permit, a credit-card sized piece of plastic with my pic and a number, was not good enough, even though it was a solid bit of ID from an EU member state.

Proof of address was even harder to verify. I had no utility bills in my name. How could I when I’d been away? I was not on the electoral roll. I had no tenancy agreement either, or any other bits of official paper that verified that I was a bona fide person living at a bona fide address. The only bank account most banks were willing to offer me was the basic variety. This despite the fact that I could prove I had four bank accounts in the Netherlands, complete with credit and debit cards, and half a house and was very solvent. One bank was willing to offer me an offshore account on the grounds that I was based in Amsterdam, except that I wasn’t any more and as a Brit on home territory I wanted access to the standard banking facilities I’d enjoyed here before my sojourn away.

I tell this anecdote because it illustrates how easy it is to fall into some bureaucratic black hole when you don’t fit the tight Know Your Customer profile drawn up by the Financial Conduct Authority. I did eventually get to be allowed to open a current account (another long story), but right now those basic bank accounts look very attractive.

The basic account is, as its name suggests, very limited. You can pay money in, or out using a direct debit, and you can get cash from an ATM. And that’s about it. People who have basic accounts are unlikely to have any savings or other financial assets. They are the people whose money is safest while the world’s banking systems teeter on the brink of collapse. After all, if you’ve got very little, you’ve got very little to lose.

Everyone else, on the other hand, is anxiously waiting to learn if they will remain solvent or not. The banking edifice is like a house of cards. A couple of aces have already fluttered to the floor, the rest of the pack is tottering. The big question is what will happen to taxpayer-funded services? More than 60 councils invested millions in Icelandic banks, prompting fears of a collapse in local services, while Gordon Brown is insisting that education and health budgets will not be cut as a result of pumping billions (£500bn to be precise) into shoring up the UK banks.

What we are experiencing is the result of conjuring money out of thin air. The last time the world went through a similar experience was in 1929 – the Wall St Crash. My grandfather lost everything then and he had a lot to lose. His siblings had to wire him the fares to bring his family back here by boat as he was left destitute.  This time round, it’s both depressing and infuriating that the lessons of 80 years ago appear not to have been learned and the City fat cats will still get their bonuses, despite having brought the world to its knees. Who, if anyone, will be called to account? There’s a weird poetry in the banks demanding proof of ID under the Know Your Customer regulations, but we cannot insist that the banks prove themselves to us…

2 thoughts on “Held to account”

  1. I always advise people who are emigrating to hang onto at least one UK bank or building society account with a few quid in it. It’s not just the ‘never say never’ attitude to leaving the UK, there’s also the chance that you may get funds in sterling.

    A friend of mine here in Ibiza hasn’t been back to the UK for seven years. She hates the place. But in the summer she was the unexpected beneficiary of a will. It was less than 2000 quid, but a nice surprise nonetheless.

    To get the money she first had to prove to the British lawyers that she was who she said she was. That set her back over a hundred quid. Then the cheque arrived. So she took it to her bank. ‘I’m afraid that’ll take 40 working days to clear,’ she was told. With bank holidays it took three months and she was charged for the receipt of the cheque. The exchange rate wasn’t too clever either.

    If she’d had a Nationwide account she could just have taken the money out of a hole in the wall here.

  2. So very true, Nick. I did hang onto one account for about 6 years after I emigrated. However, I had problems with the bank – they refused to issue me with a new cheque book because I had paid almost nothing in during that time. This was despite the fact that the account contained about £10k, which they were obviously using as a liquid deposit to make money from. I was so incensed by their attitude that I closed the account. If I were going abroad again, I certainly would not close down all my accounts now.

    I could write a book about what it takes to open an account here when you become a re-pat. It took me 5 months and a lot of wiliness (legal, I hasten to add!) to persuade a bank to let me bank with them. The whole process was a stressful nightmare.

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