Rules to stop the transfer of ill-gotten gains have tightened in recent years following a spate of high-profile scandals such as HSBC’s failure to stop laundering by Mexican drug dealers using its accounts.
However, those tighter rules have also harmed some innocent customers. Some have found themselves cut off from bank accounts or payment services because they are associated with unstable countries such as Somalia, while others have had to pay fees to prove their identity to their bank or investment firm.
“We are committed to saving businesses a further £10bn in red tape to help create more jobs for working people, boost productivity and keep our economy growing,” said Mr Javid, who is himself a former financier and used to work at Deutsche Bank.
“This new review is about making sure the rules we have to protect our strong financial services industry from abuse are not unintentionally holding back new and existing British business. I want firms to come forward and tell us where regulation is unclear or its enforcement ineffective.”
The call for evidence from the Department for Business, Innovation and Skills is open until October 23, and seeks to hear from banks and their customers if there are cases of the rules being disproportionate and heavy handed. Ministers also want to see any examples of better systems from around the world.
Banks hope that the threat of enormous fines will be reduced in instances where lenders can show they worked hard to meet competing goals of stopping illegal activity while also serving the vulnerable customers who the government wants to help.
A particular concern is incoming rules on politically exposed persons, shortened to PEPs in the sector’s jargon.
While this traditionally covered politicians in countries with high levels of corruption, new EU rules could expand this to all politicians in the UK and their families.
“This sometimes runs a little contrary to common sense,” said Chrisol Correia, director of global anti-money laundering at LexisNexis Risk Solutions.
“For example, this will mean that at the point of entry to a bank, the son or daughter of an MP will initially have the same risk weighting as the governor of an oil rich province from an unstable emerging economy – the bank will have to treat them initially the same way, when they clearly pose different levels of risk,” he said.
“That will be quite demanding on customers, and it is a large population, covering elected officials, civil servants, senior members of the judiciary and military, and also their family members.”
Those customers and their banks will all have to spend far greater amounts of time applying for accounts, which means resources will not be free to allocate to the riskiest customers, he said, and could result in higher costs for ordinary customers across the bank.
One problem for the government is that the British authorities may not easily be able to adjust rules and guidelines which are set at a global or European level. In addition, UK banks must abide by differing rules on the ground in the different countries in which they operate - particularly the US, which enforces its finance rules rigorously, covering anyone who settles dollar transactions through the US even when the parties involved in the tranfer of funds are based in other countries.
