By Samantha Sheen, AML Director Europe, ACAMS
25 April, 2017

The true measure of any society can be found in how it treats its most vulnerable members
(Mahatma Gandhi)

Last year I posted a blog in support of the UK’s fraud awareness campaign called Take 5. In that blog, I shared the story of a relation of mine who fell victim to a fairly sophisticated fraud scheme. As a result, they lost what was for them, and most people, a significant amount of money.

Part of my job involves reading a variety of news sources in an effort to try and stay up-to-date on the latest anti-financial crime initiatives. And two stories recently caught my eye.

It actually happened when I found a piece by a gentlemen named Richard Fuller, who wrote an article in the BCCA Review (link below) about bank de-risking and the effect it had on money service businesses (“MSBs”).

The financial services regulator, the Financial Conduct Authority (“FCA”), has estimated that 1.5 million adults in the UK don’t have a bank account. A number of them often look to MSBs, pawnbrokers and payday lenders (collectively, “retail financial services”), instead.

Richard explains that over the last 5 years, banks have been refusing to open new accounts for retail financial services providers. And this is despite the fact that these retail financial services providers are regulated (i.e. authorised to operate) by either by the HMRC or the FCA.

Richard notes that retail banking has become a much-unloved line of business for many of the big banks, largely because it doesn’t generate enough revenue for them. And Richard’s point was that even if the retail financial services sector does not get much sympathy from regulators, its customers should. And for those who don’t have a bank account, there is an argument that retail financial services should be viewed as a solution for the under-banked, and not the problem.

So how to resolve this? Richard argues that if UK regulators are prepared to authorise financial service providers, they should also mandate that banks must consider providing bank accounts to them.

So, while I was pondering this argument, I happened upon a brief article and advertisement in the same periodical for the UK Vulnerability Registration Service (“VRS”). And the tag line for the ad was “the vulnerability challenge – time for action”.

Launched at the end of February 2017, the VRS was created to provide a place where vulnerable customers or those who care for them, can record their personal circumstances in order to protect them against further debt or related financial problems.

The VRS is a private sector initiative that offers a free-to-use service for vulnerable customers. It’s accessible by financial institutions to help them identify customers in potentially vulnerable circumstances and implement controls to prevent adverse financial activity from taking place.

I remember once hearing about an elderly woman who lost almost all of life savings through repeated calls from fraudsters claiming to act for charities. Widowed and living alone, she easily succumbed to the pressure and made a number of “donations”. Her children encountered a number of problems trying to convince the bank to restrict the transaction activity on what money remained in her account. I have also heard stories about people living with mental health problems where impulsive spending results in them being unable to pay for next month’s rent or even groceries.

Both scenarios are heart-breaking but illustrate some of the many examples of those who might easily found themselves in receipt of a 90 day notice letter, advising that due to the activity on their accounts, they need to find another institution willing to give them a savings account where they could have their monthly pension or assistance payments paid into. Otherwise, they would need the services of a retail financial services business.

So, you’re probably wondering – what do MSB bank accounts and the VRS have in common? Well, nothing. Except that the two show different sides of the challenge around financial inclusion. For some people, it’s being able to cash a work cheque or make a transfer back to family members in another country. For others, it’s about being able to continue to use financial services in a safe and responsible way, without being taken advantage of by fraudsters or losing access to financial services altogether.

And while there is much to be said about the global reach of de-risking and financial inclusion, trying to initiate local solutions locally might help to make a difference, even in the short-term, while efforts at the international level continue to try and sort out an otherwise complex challenge.

To read Richard Fuller’s Article see: https://www.bcca.co.uk/wp-content/uploads/2017/03/BCCA_Review_February2017.pdf

To learn more about the VRS see their website: https://www.vulnerabilityregistrationservice.co.uk/