Thousands of bank accounts have been closed down, often with no explanation as to why this has happened. However, an expert has argued banks are “too heavily reliant” on AI technology which is causing incorrect fraud allegations.
The figures, obtained by the Financial Conduct Authority revealed that in 2016-17, just over 45,000 accounts were shut by banks.
The total has increased every year since, climbing to just over 343,000 accounts in 2021-22 – representing well over 1,000 for every business day of the week, The Mail revealed on Sunday.
When people or organisations have their bank accounts closed, they often receive little or no explanation as to why this has happened, though the banks sometimes say it is due to concerns over financial crime such as money laundering and fraud.
The new data emerged following the NatWest scandal concerning Nigel Farage and the closing of his account.
Mr Farage used a subject access request to discover that, despite initial denials by NatWest subsidiary Coutts, his political views had played a part in the closure of his account.
Dame Alison Rose, chief executive of NatWest had to step down last week after making a “serious error of judgment”.
The huge rise in account closures would appear to confirm anecdotal evidence that lenders are increasingly adopting a ‘shoot first, ask questions later’ approach.
Growing numbers of businesses, individuals and charities say this has led to their accounts being shut down despite there being no evidence of wrongdoing.
Jeremy Asher, Consultancy Regulatory Solicitor at Setfords explained the data showed most of the problems are associated with banks reporting customers to Cifas, which manages the national fraud database.
Once registered on that database it is extremely difficult for people to obtain new bank accounts or credit facilities. Most of the time the banks are correct to load such markers, “but not always”, he stated.
Mr Asher said: “The figures reported as part of the data subject access request obtained from the FCA by Nigel Farage include 90,000 people reported as being a Politically Exposed Person.
“The high numbers are a surprise and indicate to me that banks are being overly cautious. They should be asking ‘Does this person really present a risk’ but they seem not to.
“I am also concerned that many of those decisions will have been flagged and supported through automated processes, which I am seeing a huge increase in complaints about.
“I think the problem lies with the banks having become too risk-averse and also relying too heavily on AI and automated processes to investigate and flag fraudulent behaviour.
“There has been a dumbing down of standards in the past 12 months or so… with the use of automated decisions, and many of those affected are in fact innocent of wrongdoing.”
The reported figure of 343,000 accounts being closed in 2021-22 correlates with Cifas’ figures which show that in 2020 there were 310,000 markers loaded, and in 2022 another 360,000 were loaded.
Mr Asher said: “Frequently more than one marker is loaded per data subject, so in my opinion the number of accounts being closed is consistent with Cifas’ figures and the 90,000 for PEPs.”
