De-banking: A Global Issue Affecting Millions

De-banking is a global issue affecting millions of people worldwide. In the UK alone, over 50,000 people have been refused a bank account in the past year.

Many individuals who have been de-banked have no other way to access basic financial services. This can lead to a range of problems, including difficulty paying bills, receiving wages, and accessing credit.

De-banking can also have a disproportionate impact on vulnerable populations, such as the elderly, low-income households, and those with mental health issues.

Debanking is when a bank chooses to close the account of an individual or business. This decision is usually made when the bank feels that the account presents a regulatory, legal, financial or reputational risk to them.

Banks have the freedom to choose with whom they do business and can sever ties with anyone they feel presents a risk. This means that even if you've been a loyal customer, your bank can still close your account if they decide it's not worth the risk.

The debanking process can be triggered by several factors, including financial crime, failure to meet regulatory compliance, and account inactivity. Banks are usually required to give a business or individual two months' notice if they want to close an account.

In cases of suspected fraud, there is no minimum notice requirement, and the account can be closed immediately. This can cause significant upheaval and distress for the individual or business affected.

Canada was affected by the Emergencies Act, which was invoked in response to the 2022 convoy protest. At least 76 bank accounts linked to the protests totaling CA$3.2 million were frozen.

In Canada, the government's use of the Emergencies Act to freeze bank accounts highlights the potential for de-banking to be used as a tool for social control.

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In the United States, the term "de-banking" has gained traction, particularly in the context of cryptocurrency assets.

The term was discussed on a November 2024 episode of The Joe Rogan Experience podcast with investor Marc Andreessen.

Coinbase, a cryptocurrency exchange, has released statements asking financial institutions to "pause all crypto asset-related activity" due to litigation with the Federal Deposit Insurance Corporation (FDIC).

Multiple instances of US and Canadian banks reportedly dropping Muslim clients on questionable grounds have been covered in the media.

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Canada was one of the countries affected by the Emergencies Act. At least 76 bank accounts linked to the 2022 convoy protest were frozen, totaling CA$3.2 million.

The government's swift action sent a clear message that it would not tolerate disruptions to the country's economy and infrastructure.

Transparency is key to reducing the risk of being debanked. Businesses can start by ensuring compliant policies are in place.

Good banking practices, such as diligent record-keeping and reporting on where funds come from, are essential. This helps banks understand the source of the funds and reduces the risk of debanking.

If you feel your account has been closed unfairly, you have the right to lodge a complaint with the Financial Ombudsman.

To prevent debanking, businesses need to focus on transparency and good banking practices. This includes having compliant policies in place.

Ensuring diligent record-keeping is essential to prevent debanking. This means keeping accurate and up-to-date records of financial transactions and activities.

Reporting on where funds come from is also crucial. This helps banks and financial institutions to understand the source of the money and reduces the risk of debanking.

Businesses or individuals who feel they have had their accounts closed unfairly can lodge a complaint with the Financial Ombudsman. The Financial Ombudsman is a free service that settles issues between consumers and businesses that provide financial services.

The number of debanking-related complaints received by the Financial Ombudsman Service has increased by 81% year-on-year, from 367 in 2022-23 to 666 in 2023-24.

This spike in complaints raises concern over the treatment of businesses by major banks, and questions around whether some are being wrongly debanked.

Banks' due diligence is not an exact science, relying on online information that may not be accurate, complete or up-to-date.

The UK government has proposed tighter rules to protect businesses, requiring banks to give at least 90 days notice before closing an account and provide clear explanations for their decision.

It can be difficult for a business affected by debanking to prove their innocence, as banks rarely disclose details of their decision-making process.

The proposed rules aim to address the lack of transparency in bank decision-making, allowing businesses to understand the reasons behind account closures.

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Debanking is a serious issue that affects millions of people worldwide. According to the article, over 5 million people in the UK alone have been affected by debanking since 2015.

The lack of transparency and consistency in the decision-making process is a major concern. Banks often fail to provide clear reasons for closing accounts, leaving customers in the dark.

The impact on small businesses is particularly devastating, with many being forced to close due to lack of access to banking services. In fact, 1 in 5 small businesses have been affected by debanking, resulting in lost revenue and jobs.

The lack of regulation and oversight is a significant contributor to the problem. Without clear guidelines, banks can operate with impunity, leading to a culture of fear and mistrust.

Debanking is not just a minor issue, it has serious consequences for individuals and communities. The loss of access to banking services can lead to financial exclusion, poverty, and social isolation.

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