Bank account closures and CIFAS markers

Transcript of The Which? Money Podcast featuring Tim Thompson .

Speaker 1

Welcome to the Which? Money podcast. Your weekly hits of money, news and personal finance hacks to help make you better off. I’m your host, Lucia Ariano. And here’s what’s coming. Up this week.

Speaker 3

Both the story about Nigel Farage and what we’ve been researching here, which relate to the same fundamental issue, which is about why banks close customers’ accounts and then what customers are told about that decision.

Speaker 2

I’m also clamping down on money laundering, all the rest of and fraud. But picking on the little man in the street, I think it’s just a bit of a joke.

Speaker 4

The effect on people is quite extraordinary. People have lost jobs.

Speaker 1

Today we’re talking about banks closing customers’ accounts with little or no notice. And even if you do have notice and want to sign on with a new provider, you can’t do that either. It’s something that’s been happening to thousands of people over many years, but surprise bank closures have recently shot into the mainstream media. After Nigel Farage’s account at the exclusive bank Coutts was closed, so what’s behind all of this? Well, we’ll be unpacking it all today and discussing what’s being done to clamp down on it. And for this, I’m pleased to say we’re joined by Which? senior researcher and writer. Faye Lipson, welcome back to the show.

Speaker 3

Hiya.

Speaker 1

So far, then our listeners might have seen one of the many stories in the press. Recently about Nigel Farage’s account being closed. How is this related to what? We’re talking about today.

Speaker 3

So both the story about Nigel Farage and what we’ve been researching here, which relate to the same fundamental issue, which is about why banks close customers, accounts and then what customers are told about that decision, it seems like in Mr Farage’s case, the decision to close his account was a mixture of commercial and a kind of sensitive political reasons. In our research, we’ve been looking at the related but equally serious issue of accounts being closed after customers are incorrectly flagged as using them for fraudulent purposes such as money muling for example.

Speaker 1

And with Farage’s case, it’s with the exclusive bank Coutts, as I mentioned. And it’s obviously a very high-profile person we’re talking about, but I’m sure our listeners will be thinking well, could this happen to me? So, tell us Faye, they could it. How exactly has this been affecting the thousands of people caught up?

Speaker 3

Well, what Mr. Farage has found is that banks aren’t obligated to tell you why they’re shutting you down, and in many cases they won’t, which makes it very difficult to challenge the decision with the bank directly. As we said before, Coutts decision about Mr. Farage seems to have had a political element to it, but where fraudulent activity is suspected on a customer’s account. Things are actually even worse for customers, as accounts can be shut down without any warning at all. That’s rare, but it can happen, and innocent activity can be wrongly flagged as fraudulent. But in some cases, the customer isn’t given any chance to explain themselves. They’re simply shut down, and that can be a nightmare for individuals who are suddenly left, of course, with no means of receiving their income or paying their mortgage, rent or bills, and fundamentally, no real idea why any of that is happening to them.

Speaker 1

Ohh, it’s awful, isn’t it? I could only imagine how confusing and frustrating this must be. And in a moment, we’ll hear from Roy who generously shared his very real story of being wrongly locked out of his own bank account because of suspected illegal activity. But first Faye, can you go into a bit more detail about the scale of the issue we’re talking about?

Speaker 3

So, if your account is shut down and the bank won’t reverse its decision, the final resort would then be to complain about the decision to the Financial Ombudsman Service. Now Which? has spoken to the Ombudsman, which has shared some data on the scale of this issue and it showed us data from the last five years and it showed us that in each of those years it’s received well over 1000 complaints about the current account closures and it’s upheld about 1/4 of those in each year, which means that in each year it agrees with the customer that the bank has got things wrong in hundreds of cases. But these are only the cases we know about because the customer has fought back and taken it all the way to the Ombudsman, and it’s possible that there are many more cases which don’t make it to the Ombudsman at all, either because the customer doesn’t know about that as an option or is very demoralised.

So, we just don’t know the true scale of the issue, but it’s likely to be even larger.

Speaker 1

So, it does seem like this could be just the tip of the iceberg really. Well, let’s dive in then and hear from someone who had their account closed unfairly. Here’s Roy’s story.

Speaker 2

Well, I had this account with the Revolut which I used to use aboard for foreign currency and due to the COVID etc., hadn’t used the card for a while. And then when I wanted to use it. I found the account was frozen. And there was no way of getting in touch with them because everything is done via the app. So, if they block you out, that’s it. And at the time I had about €500 or €600 in the account, which I couldn’t access. So anyway, I used that consumer website resolver they fortunately managed to get in touch with them and they got back to me and allowed me to access the app for about two weeks to enable me to get my money out. Well, when I questioned why they blocked me says well, there’s somebody irregular activity on your account. Therefore, we don’t want you anymore basically and that that was it. They would give no explanation as to what it was, under no legal obligation to tell you what it is, and that was it, really, because I’m an old age pensioner, I mean I’m not some sort of money launder or drug thing or something or other. I think it. Well, it really annoyed me because they’re attacking my personality. They’re a law among themselves. I mean, I’m all for clamping down on money laundering, all the rest of it and fraud, but picking on the little man in the street who had a few £100 in there and I think it’s just a bit of a joke.

Speaker 1

Thank you so much to Roy for sharing this. You know, you can really hear how frustrating this must have been. Faye you spoke to Roy for your piece on the Which? money magazine. What sort of impact did this have on?

Speaker 3

Him. Yes. When I spoke to Roy, he was upset and shocked to find that he’d been locked out and particularly distress. That he’d had a battle on his hands to access his own money that was rightfully his. And then he’d received a subsequent decision e-mail from revolute which led him to believe that he was accused of money laundering, just something that he utterly denies, so all round, a very distressing and stressful experience for him.

Speaker 1

Absolutely. Like I said, I just really, you can’t imagine how awful it would be to be in that postion and we’ve also been speaking to Tim Thompson . He’s one of the directors at corporate protection law firm Jeremy Gordon. It’s the company that represents around 40 to 60 clients a year in disputes over account closures, and we asked him about the stories he’s been hearing.

Speaker 4

The effect on people is quite extraordinary, because if you lose a bank account and you don’t have a backup account, all your direct debits might not be paid once the accounts closed. When you then move on to try and open account elsewhere, especially with a CIFAS marker, an account will usually get opened and within two to three days will be closed and then you are at the mercy of whether you’ve got relatives who can help you with banking, a spouse or whatever. And it can make lives very, very difficult because where students are concerned, this does happen quite a lot. They won’t be able to get their student loan paid into an account, where just general members of population who work are concerned without an account in their name, most employers are very reluctant to pay wages or salary into account that’s not their name because it, they believe, probably quite rightly, that it’s something that HMRC would disapprove of. So, people have lost jobs and it can just make applying for car insurance or even renewing the mobile phone contract impossible.

Speaker 1

He also added there’s a worrying trend when it comes to the demographic of those most impacted by this issue.

Speaker 4

I’m only seeing a small snapshot and it may be that I’m not getting the full picture and I fully accept that. What I can’t work out is why on a statistical basis, there seem to be more inquiries from individuals from the ethnic minority community in the UK who appear to have markers than other communities within the UK.

Speaker 1

Now after a quick break, we’ll be back with how things need to change, as well as which banks are closing customers’ accounts and the ones doing it more than most. Now, as if losing your bank account with little notice isn’t bad enough, there is a further step banks can take which may mean you can’t take out a mortgage, another bank account, even a broadband contract. And I’m talking here about the so-called CIFAS marker. It’s a big red flag for banks, and it sounds a lot like blacklisting to me. Faye, can you tell us what it’s all about?

Speaker 3

Yes, banks and providers don’t always stop at shutting your account. If they feel confident that you’ve acted fraudulently or used the account fraudulently, they can register a marker against your name on the CIFAS National Fraud Database, which will then be seen by hundreds of other banks, insurers, finance and telecoms companies, which also look at the database. And it can last for six years, which means that if you apply for another financial product during that six-year period the provider will be searching the CIFAS database, and your name will be flagged with them. Now, it’s not meant to act as a blacklist, providers should really use it as a prompt to investigate further before deciding whether to accept the prospective customer. But unfortunately, in many cases it is simply being used as a blacklist and people are simply being automatically declined from obtaining mortgages, bank accounts, loans, even mobile phone contracts for the six-year life of the marker. Which means it can obviously have an absolutely devastating effect on that individual’s life.

Speaker 3

Now, one of the most extraordinary things about this is that your bank, when it shuts you down, doesn’t even have to tell you it’s recording a CIFAS marker against you. Naturally, it will tell you it’s shutting your account down. It may not tell you why, and it certainly doesn’t have to tell you about the CIFAS marker, so individuals only often find out once they’ve been marked in this way, after having applications for alternative replacement bank accounts repeatedly denied that in turn dents their credit score even further. So, it’s an incredibly unfortunate system for people to navigate when they don’t have the full facts.

Speaker 1

Obviously then something’s not quite right with the way CIFAS markers are being used, because we’ve had so many examples of the marker being wrongly put against accounts. Can you give us some examples of these?

Speaker 3

Yes, so. The Financial Ombudsman has a database of decisions on its website and within that database we’ve found plenty of examples in which banks and other account providers are found to have applied a CIFAS marker without a high enough standard of evidence. So, in one case this was because the bank had, in the Ombudsman’s view, failed to consider if the customer himself was a victim of an attempted identity theft or fraud, and in that case it paid the customer 100 pounds of compensation for having recorded that CIFAS marker and upholding another case, the Ombudsman said that the bank was justified in closing the customer’s account. But hadn’t actually done enough to show that the customer was complicit in fraud. And so, it unfairly recorded the CIFAS marker against her, and the Ombudsman added that a marker shouldn’t be registered against somebody who was unwilling or unwitting. There should be enough evidence to show complicity, and it ordered the bank to remove it. So, what we’re seeing here is that there’s a relatively lower bar for account closures for banks to an extent are able to make that decision for itself, but there’s a high standard of proof when it comes to recording CIFAS markers. Because of the particularly devastating effect that can have on people’s financial lives and in some cases, banks and providers are not meeting that high standard of evidence that they need to have met to take that serious course of action.

Speaker 1

And obviously the fact that your provider. Doesn’t have to tell you if it puts the CIFAS marker against you means. That all of this could be going on in the background, doing damage without you even knowing about it. You know, I’m interested to know how the banks see it all and if any are doing better or worse than others.

Speaker 3

So, the Ombudsman has given which some data showing them most complained about firms with regard to CIFAS markers over the last five years, and among these most complained about firms, TSB has had the highest uphold rate in four of the past five years, meaning that the Ombudsman thinks it’s getting a relatively high proportion of its decisions on CIFAS markers wrong, so,TSB told us that it makes important decisions every day aimed at reducing fraudulent activity and preventing criminals from operating accounts and it said that it had one of the lowest actual number of reported cases from the institutions listed. However, it added our close work with CIFAS plays a vital role in reducing the incidence of fraud and an incorrect judgement is highly exceptional. We have acted on guidance from the Ombudsman and our referrals in 2023 continue to improve.

Speaker 1

Interesting to hear from TSB there and I think we need to talk about what’s being done to make this process better for consumers and you know, more watertight. And we should give another nod to the Nigel Farage incident because it really has speed things up, hasn’t it.

Speaker 3

Yes. So, the government is now talking it, bringing in quite speedy legislation, directly as a result of Nigel Farage’s experience. To make providers more accountable to customers when making these decisions to close accounts, and it’s suggested that banks would be required to explain the reasons behind the closure, which they’re not always required to do at the moment. And that customers would have more opportunity to challenge that decision with the bank. And there’s also a case for saying that customers should be informed when a CIFAS marker is recorded against them, given the devastating effect that this can have on them for up to six years and customers just simply can’t challenge something that they don’t know exists.

Speaker 1

Well, to finish, Faye, I’d like to ask you what our listeners or you know anyone should do if this happens to you. But first, let’s hear again from Tim Thompson . Here’s his advice for anyone ending up in this position.

Speaker 4

They can be challenged, as I said, there is a process to it. Fundamentally at the beginning of any successful challenge is. Trying to get to the bottom of what is relied on in evidence. (a) what the transaction is, if it’s a fraudulent transaction that’s alleged, and then why that transaction is fraudulent and then why the account holder is complicit in that fraudulent activity. And it’s often that area where the justification for the marker starts to fall about. Especially when we know that in relation to the Financial Ombudsman Service. They do expect banks to ask questions of account holders at the time when there is activity on the account that they don’t find to their liking.

Speaker 1

, Faye, if you find yourself in the position where your account is closed out of the blue, potentially unfairly like thousands who have experienced this, what should you do?

Speaker 3

So, the first step of course, is to ask your provider why they’ve done this and if they won’t tell you which they often won’t. You can make a subject access request, which is what Mr. Farage has done. This is a type of legal request for your own data held at the bank and you can request any information relating to the decision to close your account. Once you’ve received this. Read it and understand the rationale. You can appeal it through the Bank’s internal complaints procedure, if you think the decision is wrong. So, if the bank or provider won’t then reverse their decision, you can then take it further to the Ombudsman for an impartial decision. But what I would add is if you do finds that the reason for your account being closed is that you’re being accused of using it for fraud. It’s also a good idea to check with CIFAS directly by way of another separate subject access request to see if a marker has been recorded there against your name, and if it has then that’s also going to need to be appealed with the bank or provider that registered the marker. And if that doesn’t succeed, you can appeal that to CIFAS directly. If CIFAS upholds the bank or providers decision, you can then also appeal that to the Financial Ombudsman so a slightly longer route there to challenge a CIFAS marker, but still avenues open to you if you find that this happens to you.

Speaker 1

A huge thank you to Faye for coming on the show today and to you for listening to this week’s episode of The Which? Money Podcast. If you enjoyed today’s show, please do hit subscribe to make sure you catch our episodes as soon as they drop for more money. News and advice find us on social media at which money and online@which.co.uk/money, and we also have a free running newsletter which is delivered to your inbox every Monday. To sign up, visit which.co.uk/money newsletter. This episode of the Which? Money podcast was written and produced by Me, Lucia Ariano and Rob Lilly, edited by Eric Brea, with additional support from Grace Witherden and Matthew Jenkins.