Senior figures in the Government have been quick to condemn Coutts bank for terminating their relationship with Nigel Farage and to promise greater transparency for customers who are “de-banked”, with Treasury sources suggesting they may introduce secondary legislation to require banks to give reasons to customers before closing their accounts.
Behind the headlines, there is a nuanced debate to be had about the interface between three principles: Anti-Money Laundering Regulations designed to prevent organizations from taking on high-risk clients where those risks cannot be mitigated; the right for banks and other institutions to exercise commercial independence; and the Equality Act 2010. Mr. Farage hasn’t put it quite this way, but have his human rights been infringed?
Banks (like solicitors dealing with client money) are required to perform enhanced due diligence on politically exposed persons (PEP), defined in the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 as “an individual who is entrusted with prominent public functions, other than as a middle-ranking or more junior official” due to the higher risk that a PEP may be exposed to bribery or money laundering. If, as a result of this due diligence, the individual presents a risk that the organisation cannot suitably monitor or address, the organization should stop taking that person’s money.
Mr. Farage obtained notes from Coutts which suggest that he was considered to be a “low-risk PEP” but that there were concerns about his political views and political allegiances, noting in particularly previous apparent support for the Russian regime. There is clearly a danger that if organisations conflate reputational risk to them with a genuine risk of money laundering, their analysis may become blurred and the Equality Act may be overlooked. If a bank concluded, for example, that they could not mitigate the risk that money from an oligarch subject to economic sanctions would be laundered through a pro-Russian individual’s bank account, that would be a reason to end the relationship with that pro-Russian individual, but Coutts clearly did not believe that to be the case with Mr. Farage. They feared that, in their words, he was a “useful idiot” for Putin and were worried about the reputational damage caused to Coutts by Mr. Farage bruiting about his relationship with the bank for millionaires. Commercial independence means that the bank can reject potential customers on the basis that they do not have enough money, but equality legislation means they cannot reject someone as a customer for their genuinely held philosophical beliefs any more than because of their gender, race or sexual orientation.
The Financial Services and Markets bill which received royal assent recently requires the FCA to review how banks are achieving the fair treatment of customers including PEPs. If the Government is to bring in additional secondary legislation it will need to carefully consider how to achieve greater transparency for customers about the reasons for banks closing their accounts without the banks inadvertently “tipping off” potential money launderers that they are under investigation. It may be thought that they will also need to consider how to balance the rights of customers not to be discriminated against because of their lawful beliefs with the right of financial institutions to decide with whom to do business.
An interesting codicil is the development of Equality Act case law on the question of whether a philosophical belief is “worthy of respect in a democratic society” in the sense that it is compatible with human dignity and does not conflict with the fundamental rights of others. One might pity the tribunal trying to assess whether the various comments made by Mr. Farage which so concerned Coutts each fell within that definition. We can perhaps all agree that individuals should never be criminalised or denied essential services for lawfully expressing their genuinely held beliefs, but on one interpretation of the Equality Act, it does not necessarily follow that every supplier of services has to supply those services to everyone who holds any view whatsoever, with no consideration of how the supplier’s business may be damaged by association with an individual. Where that business is fundamental to both the national economy and to the ability of individuals to undertake economic activity, it really matters that the Government gets this balance right.
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