Published 6th November 2020; Updated 2nd August 2021
The Brexit effect
In November 2020 we published an article explaining why a number of UK banks were closing the accounts of customers living in the EU. That was a consequence of Brexit. The article is reproduced at the bottom of this newsletter.
We must now report that a number of other transactions are being frozen and in some cases accounts are being closed.
The Money Laundering effect
In recent months, the UK banks have come under pressure because of their perceived laxity in relation to money laundering. While the frequency of account closure due to EU Passport issues has diminished, there are more and more cases reported in the national press regarding innocent payments being frozen or blocked and accounts being closed for no apparent reason, with the funds in those accounts being retained for indeterminate periods of time by the banks.
The threshold for suspicious activity is very low and it is getting lower as the banks come under increasing pressure. It has particular impact on international transfers — even payment to (or from) HMRC can be delayed. To add insult to injury — once the funds (or even the whole account) are frozen, the bank is not allowed to give you a reason.
Once the funds have been blocked there is no easily predictable timescale for resolving the issue, and it is impossible to say whether the bank will close your account or simply reinstate the account and the funds.
We all understand the need to inhibit or prevent financial crime, but it does seem that the semi-automatic selection process being used by the banks is causing quite a bit damage to innocent parties. This is not just a UK problem. Nor is it a problem associated with the big banks. Recently one of the UK’s “challenger banks” was obliged to do the same and froze many customers accounts. Fortunately, they were unfrozen quite quickly.
How to prevent an account or transfer being frozen
It is almost impossible to have any influence over the bank of the other party, but you can ease the passage of a payment or receipt through your own bank by letting them know well in advance what to expect. For example, if you are expecting to receive a large amount of money from the sale of a property, tell them. Write a letter at each stage. Tell them which solicitor’s account is paying into your account. If you don’t, the bank’s computer is bound to consider the sudden arrival of, say £500,000 in your account, as being suspicious. Of course, there is no guarantee of success, but such action can only help.
For help with this or any other taxation matter, get in touch
The information contained in this article is believed to be correct at the time of publication. The content of this article is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.
The following is our original article:
Published 6th November 2020
Tens of thousands of UK bank accounts and credit cards, held by individuals living in Europe, are set to close by 31st December 2020, as a result of Brexit.
Why is this happening?
The current rules for banks and financial services companies, called the “EU Passport”, are set to end by the end of the year. As a result, some UK banks have decided to close the bank accounts of some non-residents rather than apply for a new licence in each country.
What can I do if my account is closing?
If you have received a notification from your bank in which they have told you that they are closing your account, then there are a few alternatives:
- You may still be able to open another account with a different UK bank;
- You may be able to open a sterling (GBP) account with a bank in the country in which you reside (do not forget to factor in fees!);
- You could consider opening an account online with a UK “challenger bank” or “mobile bank”. We are aware that some overseas clients have done this. Here is an article from Which (a leading consumer’s magazine), that includes a review of some of these new banks.
Banking arrangements are personal and so we cannot say whether any of these banks will suit your needs.
For help with this or any other taxation matter, get in touch
The information contained in this article is believed to be correct at the time of publication. The content of this article is intended to be a brief summary of the principal points of the legislation or proposed legislation only, and it is provided for general guidance only. It may not take into account subsequent changes in the law and of necessity it omits much detail. Taxation is a complicated subject and is subject to change. You should only rely on advice prepared specifically for you. Neither the writer nor Landlords Tax Services Ltd can be held liable for any loss arising from any act or omission by you as a result of your understanding of this article. If the subject matter is of interest you should contact us to see if there is a relevant update, and to take professional advice which takes into account your circumstances.