Loyal customers are feeling “let down” when their bank accounts are closed, particularly when they are not given a valid reason, a financial watchdog has highlighted.
Financial arbiter Reno Borg says in his annual report that certain customers, however, fail to realise that more stringent anti-money laundering rules need their cooperation in providing more personal details and added information about the use of their accounts.
In this regard, the arbiter suggests that banks and regulatory bodies should discuss how to balance compliance with anti-money laundering laws with lessening “unnecessary” bureaucracy that may make life difficult for customers and may hinder investment in financial services.
Moreover, bankers should also embark on an educational campaign to explain the new rules and why clients are expected to conform.
“The lack of proper communication between bankers and their clients gives rise to unnecessary disputes which can be avoided only through a simple and adequate line of communication”, the financial arbiter said.
The financial arbiter dealt with a number of cases last year involving either the closure of accounts or the refusal to open a new basic bank account.
On the latter, the arbiter said an application to open a payment account with basic features does not automatically give the consumer a right to such an account.
The consumer must prove that he had a genuine interest in opening the account, and banks are obliged to conduct a thorough due diligence exam prior to taking on a new client.
If there are “serious doubts” that the opening of a bank account may breach rules and regulations, the bank is obliged to refuse the application, the arbiter said.
In one complaint about an account closure, the arbiter upheld the unnamed bank’s argument that it had no option but to close the account, as the client had refused to provide documentation necessary for due diligence checks.
The arbiter acknowledged that long-standing clients may resist a bank’s requests for further information following a long professional relationship, but said banks are obliged to ensure ongoing due diligence, as otherwise they risk being sanctioned for not doing so.
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