'Counter rage' over identity checks

THE Government is rethinking planned changes to money-laundering laws after a barrage of angry feedback from investors and financial advisers.

Banks complain that their staff are being subject to an increasing amount of 'counter rage' as customers find they can't get their money out because they can't prove who they are.

Bank insiders say that their hands are being tied by requirements to check customers' identities when handling unusual requests. Increasingly, a single piece of identification such as a driving licence, is deemed insufficient.

Angry customers are left unable to complete their transactions, sparking furious confrontations in bank branches.

Bank staff aren't the only ones being caught in the crossfire. Lawyers and accountants are now lobbying the Home Office over proposals that will force them to report any suspicions they have about money laundering. The advisers claim that such a move will force them to breach client confidentiality.

The rules for advisers are complicated by the fact that financial services companies have to comply with a web of legislation on money laundering.

The Financial Services Authority has its own set of rules and firms are also bound by the Proceeds of Crime Act and the Money Laundering Regulations, which incorporate the latest EU directives.

These regulations extended anti-money laundering checks to a wider range of firms, including estate agents, accountants, jewellers, auctioneers and car dealers.

As the new rules are currently drafted anyone who falls into one of these categories of adviser who fails to notify the authority about their suspicions can be jailed. And the FSA has been quick to fine firms it believes are not taking their responsibilities seriously.

Advisers say that the rules are too onerous and it is still not exactly clear what sort of 'suspicious' behaviour has to be reported and what does not.

Advisers say that they, and banks, are worried about the way customers react when faced with onerous restrictions about how exactly they prove their identity when withdrawing large amounts of cash or closing accounts.

The Financial Services Authority says it wants firms to make greater use of automated databases to verify a customer's identity. It also wants to move to a single document for proof of identity rather than making customers produce several, something that bankers and others would like to see happen.

Jeremy Thorp, director of financial crime at the British Bankers' Association, says: 'Checks are made for lots of reasons, not just to stop money laundering, but also to prevent fraud. The public has to realise that the aim is to fight financial crime.

'We want to be able to tap directly into agencies such as the DVLA, the Passport Office and the Department for Work and Pensions so that we can automatically verify the identity of customers.'

Who do you think you are?

Investment giant Fidelity told Claudette McDonnell to prove her identity before she could withdraw cash from her account. Instead, she decided to close it – only to find that without proof she still couldn't have her money. As a long-standing customer Claudette was incensed.

The extra checks on identity are supposed to make it harder for criminals and terrorists to launder money. But they are also tripping up law-abiding customers, some of whom find it difficult to produce the correct paperwork.

Although all new customers of banks and building societies have been required to give proof of identity since 1994, more recent rule changes mean that companies now have to double-check the identity of many established customers.

Claudette's problems were made worse because she shares a house with her mother, so bills are not in her name – and she was reluctant to put valuable items such as a passport or driving licence in the post.

Eventually Fidelity accepted a letter from the Inland Revenue as proof. Fidelity said it had to protect customers from the risk of financial crime and to comply with the Financial Services Authority requirements for customer identification.