Been Debanked? Here’s What You Can Do

The authority of banks to terminate customer accounts, particularly in instances involving fraudulent activities, money laundering, terrorist financing, or other illicit conduct, is no new practice.

But in the past decade, there has been a clear shift as banks have proactively begun to conduct routine due diligence searches, especially on High Net Worth Individuals (HNWIs), to manage potential reputational risks. Indeed, these days, banks view it as their duty to shut up shop on individuals that they deem a threat to their reputation, without providing any justification.

So, the question we are all asking is: what on earth is going on with banks and financial institutions in the UK?

It’s a phenomenon that’s come to be known as ‘debanking’, and it exists within a murky grey area of financial jurisdiction. But are there ways that you can safeguard yourself from this practice, and what steps can you take if this event befalls you?

Delving into the Debanking Debate

 
As several high-profile debanking events have hit the headlines (notably Nigel Farage’s case against Coutts in June), a heated debate has been stirred over whether our personal activities and political views should face scrutiny from banks.

Even the institutions themselves appear split on the issue, with some banks claiming that it falls within their jurisdiction, and others openly disagreeing with the practice.

Several major financial players, including Tide, Wise, PayPal, JPMorgan Chase and Lloyds Bank, have faced accusations of debanking individuals without any apparent breach of financial regulations.

This can partly be attributed to the fact that, unlike essentials like food and water, there’s no inherent ‘right’ to a bank account. Legally speaking, a bank account is no longer globally acknowledged as an absolute right.

However, in a predominantly online banking world, debanking someone effectively isolates them, hindering access to crucial financial resources such as income, customer funds, and the ability to carry out transactions or meet financial obligations like paying employees and bills.

The consequences of debanking extend beyond immediate financial inconveniences, affecting individuals and businesses in broader and more enduring ways. If faced with debanking, what can you do, and what preventive measures are available?

Resources For The Debanked

 
If you’ve experienced debanking or worry about it happening to you, there are measures individuals and organisations can take to address a debanking decision or mitigate its consequences.

Alternative banking services

If you’re concerned about a bank shutting its doors to you, individuals and organisations may find it a worthwhile venture to explore the growing fintech landscape. Online banks, payment services, and cryptocurrency platforms often have more flexible requirements, potentially offering a vital support system for those who have been debanked.

Legal Action

If you feel you have grounds to accuse a bank of contract violation or discrimination, such as closure due to political views, this is a possibility. However, it’s worth noting that the practical likelihood of successful legal action against a bank is relatively low.

The Financial Ombudsman

The Financial Ombudsman provides dispute resolution services, which may involve negotiations, mediation, and potentially a reversal of the debanking decision. But, again, there are significant uncertainties regarding the efficiency and time required to address the issue through this channel.

The High Net Worth Survival Guide

 
In a landscape where increased attention is inevitable, strategically insulating oneself as an HNWI becomes not just a good idea but a crucial necessity.

This involves implementing measures to navigate the complexities of financial scrutiny, thereby ensuring the preservation and protection of wealth in the face of potential challenges.

• HNWI must make reputation-driven choices about issues. Any financially-murky actions could give banks ammunition to debank you. So, being transparent becomes key to ensuring your financial stability.
• It’s always important to make decisions you can be certain will be able to face the heat of public attention. The more scrutiny you face, the more chance of potential problems and, in this day and age, the more trouble your bank account may be in.
• By participating in activities such as ethical investing and being a leader in financial responsibility, you can build a robust financial reputation and lessen the chances of harming the security of your money.

Looking Ahead: What Can Be Done?

 
The recent upswing in debanking cases serves as a stark reminder of the intricate, and ever-closing gap, balance between wealth and reputation. This holds true for everyone, but particularly for those with a public platform, emphasising the pivotal role reputation plays in our future, both within and beyond financial realms.

As we await potential government regulations, it is evident that individuals are unlikely to be free from the challenge of debunking, underscoring the critical need for foresight in navigating the potential pitfalls of debanking.

Anticipating the risk of debanking equips individuals to proactively shield themselves from its consequences. Those who are vigilant and take preemptive measures are not only better positioned to prevent debanking but also more adept at responding effectively should they encounter such a fate.

In a landscape where the balance between wealth and your political views, actions and even general popularity is getting ever more precarious, being proactive is a key strategy for safeguarding your financial stability.