A review into the bank that closed Nigel Farage’s account said there was no evidence of political discrimination, but potential rule breaches have been found in the process of account closures.
In phase-two findings published on Friday by NatWest, Travers Smith said it had found “no evidence of discrimination” after reviewing 84 account closures, or 65 cases, “including no evidence of a customer’s account being escalated for exit, or ultimately being exited, due to their political views or party-political affiliations, or any other protected characteristic.”
However, there were one or more “potential regulatory breaches” in 13 of the cases, it said.
According to the review, in four of the cases, Coutts potentially broke financial regulations by not giving the customer notice of at least 60 days. The bank may also have breached the Financial Conduct Authority’s (FCA’s) rules, including the obligation to treat customers fairly and the contractual requirement to give reasons to the customer.
Travers Smith said the bank doesn’t have “any formalised set of definitions of the various potential bases for exit or any guidance on the threshold that must be met for a customer to be exited on one or more of these bases” except for customers who move to a jurisdiction in which Coutts does not operate.
“Once an exit decision is made, the execution of the exit decision is carried out by means of a process which is heavily reliant on private bankers accurately and expeditiously completing a largely manual process,” it said.
Earlier this year, Mr. Farage obtained a document from NatWest’s Wealth Reputational Risk Committee, showing that the committee had said “continuing to bank NF [Nigel Farage] was [not] compatible with Coutts” because his publicly-stated views were at odds with the bank’s “position as an inclusive organisation.”
The document said the bank should exit Mr. Farage when his mortgage expired in July this year or earlier if an external team tasked to do monthly adverse press checks on him found things that amplify “the reputational risks” associated with banking him.
‘Not Entirely Consistent’
Travers Smith said in findings of its phase-one review that it was “highly probable” that Coutts would have kept Mr. Farage’s accounts despite the perceived reputational risks if the relationship was deemed to be commercially viable.The firm said that while the evidence, including documents and witness accounts, “was not entirely consistent,” it considers “on balance” the decision to close Mr. Farage’s accounts was predominantly “commercial,” while noting “there is no universally agreed definition” of the terms “commercial” and “political.”
The report also said Coutts wrote to Mr. Farage using its financial crime exit letter template “in error” while the exit was not related to suspected financial crimes.
However, Mr. Farage disputed the credibility of the report, claiming it had “whitewashed” the decision to close his bank accounts.
In the findings published on Friday, Travers Smith said it believes “inconsistency with purpose” was the predominant reason for the exit in one case and a substantial reason in another, and “neither involved the expression of political views or party-political affiliations.”
“Travers Smith do not consider either of these cases to have involved a breach of the relevant standards,” it said.
The firm made a number of recommendations on formalising and standarding its process of non-financial-crimes bank closures.
According to Travers Smith, Coutts closed over 10,000 accounts in the two years ahead of Mr. Farage’s exit, of which 897 were “potentially relevant” after customer-initiated exits or the closures of inactive or dormant accounts were excluded.
The firm then selected a 100-account sample, including 26 accounts that were held by then politically exposed persons (PEPs) or PEP associates. A further 16 accounts were removed because they were deemed irrelevant or didn’t have sufficient paperwork for assessment.
NatWest said it has accepted and will implement all the recommendations, review, and update exit processes, establishing “a new franchise exits process and an appropriate PEP declassification programme,” and provided new guidance and training.
“In October, the FCA confirmed that it is undertaking a programme of supervisory work with NatWest Group and Coutts. NatWest Group will continue to work with its peers and regulators and with the UK government so that it is easier for banks to communicate clearly with customers who are being exited,” the bank said.
It comes after the government said on Thursday that it’s changing the law to ensure British PEPs are treated as carrying “inherently lower risk than non-domestic PEPs” when banks and other financial services carry out anti-money laundering rules.
