This post follows on from a recent post by Enrique on continued practices of financial exclusion in relation to individuals who have had difficulties establishing their identification with Finnish authorities and have subsequently had problems opening bank accounts. It is also a response to one commentator’s fallacious claim that money laundering legislation is an adequate justification for such financial exclusion.
From what I understand of the EU legislation (Directive 2001/97/EC [FI:,EN:]) that covers this issue of money laundering, the banks are allowed as part of their due diligence to establish the identity of the entity involved and to also establish the purpose and nature of the ‘business relationship’. This involves obtaining supportive evidence, and does not specifically establish what these documents must be, thus giving some freedom to institutions to establish their own practices.
This, my friend Enrique, is probably the key reason that different banks are applying different practices. Also, imprisonment and fine are typical penalties attached to these regulations in member states, though I don’t know the specifics of Finland. This may be another reason for the inflexibility of some banking institutions.
However, in applying those practices, it’s worth exploring the EU Directive in more detail to see exactly who and what this Directive is aimed against:
The further stipulations of the legislation are particularly informative:
1) It sets out in part 2 of Article 3 a benchmark requirement on identification also on the transfer of funds of €15 000 or more.
2) It then goes on to point out that institutions can, where there is doubt about whether the account is being used on their own behalf, take reasonable measures to ascertain the real identity of those on whom they are acting.
3) It goes on to state (part 11) that Member States can take measures deemed necessary to establish the identity of persons particularly when not present face-to-face. The Directive specifically mentions the implications for ‘online commerce’ involved in this part.
So, the issue of money laundering typically involves larger sums of money that would normally be irrelevant to processing social security payments or even salaries. It also establishes that non-face-to-face transactions and those involving individuals working on behalf of other individuals (i.e. lawyers, accountants) as being the key target of the Directive. I.e. stateless persons (inter alia refugees) are nowhere mentioned as a particular ‘target group’ for these money laundering requirements, PS Voter, and of course, why would they be?
“The other key issue here is that this objective of minimising possibilities for money laundering also have to be balanced against the need to avoid financial exclusion!”
This is where interpretation of these requirements would of course allow individuals whose circumstances make ID incomplete to acquire basic banking services.
Guidance on this matter for banking institutions in the UK is provided by the Joint Money Laundering Steering Group (JMLSG). It is worth reproducing here some the key elements of this guidance in summary:
Access to basic banking facilities and other financial services is a necessary requirement for most adults. It is important therefore that the socially/financially disadvantaged should not be precluded from opening accounts or obtaining other financial services merely because they do not possess evidence of their identity in circumstances where they cannot reasonably be expected to do so. Internal procedures must allow for such instances and must provide appropriate advice to staff on how identity can be confirmed under these exceptional circumstances and what local checks can be made.
M3.1.5G states that the exceptions to guard against financial exclusion aim to help relevant firms ensure that where people cannot reasonably be expected to produce detailed evidence of identity, they are not denied access to financial services. Although a relevant firm must always take reasonable steps to check who its client is, relevant firms will sometimes be approached by clients who are at a disadvantage, or who otherwise cannot reasonably be expected to produce detailed evidence that helps to confirm identity. Examples could be where a person does not have a passport or driving licence, or whose name does not appear on utility bills.
ML 3.1.6G states that where a relevant firm has reasonable grounds to conclude that an individual client is not able to produce the detailed evidence of his or her identity and cannot reasonably be expected to do so, the relevant firm may accept as identification evidence a letter or statement from a person in a position of responsibility who knows the client, that tends to show that the client is who s/he says s/he is, and to confirm his/her permanent address if s/he has one.
4.110. ML 3.1.7G provides that examples of persons in a position of responsibility who know the client include solicitors, doctors, ministers of religion, teachers, hostel managers and social workers.
4.111. The list is not exhaustive and other examples might include, for example, district nurses or midwives who have visited the client in their homes, care home managers, prison governors, probation officers, police officers and civil servants, Members of Parliament, members of the Scottish Parliament or the Northern Ireland Assembly, a Justice of the Peace, a local or county councillor, or the staff in the registry of a higher education or further education institution
I’m sure there should be similar guidance available to Finnish banking institutions from a relevant central government agency dealing with money laundering? If not, then why not? Financial exclusion is not a priority or issue for the Finnish government?
In the UK, the advice also goes further in stating that a bank branch will typically have a ‘money laundering reporting officer’, whose responsibility it is to oversee these policies at branch level, and that a direct meeting with this individual in problematic cases will more easily lead to a solution, as they can make decisions in regard to ‘non-standard’ cases.
It should now be quite clear to you PS Voter that this issue of ‘money laundering’ cannot be offered as an excuse for continuing an inflexible practice of financial exclusion!