Relationship banking 101: relate to your customer

December 6, 2013

Money laundering regulations are penalising honest retail bank customers while driving others into the cash economy, which benefits nobody, much less the banks themselves.

I recently visited my bank to deposit a reasonable amount of money and transfer some money to pay a bill. Call me old fashioned, but it’s how I use my bank account. A polite youth asked me what was the source of my deposit (despite the fact that it was clearly tagged and inputted from a well-known UK Limited company, drawn on a UK bank) and why I was making a payment  – to a canal narrowboat marina, as it happens.

He claimed he was obliged to ask under UK money laundering regulations, which is probably true, since the banks have to comply with increasingly Draconian regulations. But this was a personal, not a business transaction, I have been with this bank for some time, have a good credit record and the amounts in question were hardly large. Perhaps all the UK retail banks have been obliged to bother their customers more than normal as a result of allegedly murky antics on the part of certain banks which have recently been referred to the Serious Fraud Office. I’m no expert, but making it difficult for ordinary retail customers to deposit and withdraw relatively modest amounts of money because the commercial divisions of certain other banks are under investigation is not obviously a good strategy. Instead, it appears to be another example of penalising the law abiding majority in an attempt to deter the criminal minority.

Or it may be part of a heavy-handed crackdown on real or imaginary terrorists or drug czars, thought up by coneheads. That’s the most logical explanation, on balance. But however circumspect international money launderers are in their laundering, I can’t imagine they do it by buying secondhand canal narrowboats. It just doesn’t sit right. Ah, but you’ll say: you’re not thinking outside the box. Terrorist masterminds might consider laundering international drug money through the purchase of a canal narrowboat from a marina in rural Wiltshire and sell it through shady international connections to a Mr. Big who fancies a canal holiday on the Kennet and Avon as opposed to the more obvious and clichéd Sunseeker with helipad moored on the Venice Lido, an inlet of Halong Bay or the Costa del Crime. It’s so contrarian that it  just might work. And a customer with an exemplary if boring record is exactly the sort of person who would fit the profile of the last person you’d expect to be an international Mr. Big. Anyone who’s up to speed with the plot of Breaking Bad would see that in seconds.

Except that even if there were such a mundanely perverse international man of mystery, he would run into the same problems as I did when he tried to pay through a UK clearing bank. So he’d jolly well have to buy a canal narrowboat elsewhere (if that was really what he was doing, which of course we know he wasn’t) or pay for it in cash – which is the basis of a black economy, which by and large we would assume no government wishes to encourage or perpetuate.

I can understand and approve of protecting savers by limiting online transaction amounts – the hapless RBS and NatWest were apparently hit by cyber attacks twice this week – but it is a basic principle of relationship banking that the bank executes the instructions of a long standing customer – unless it doesn’t want customers with those sort of old fashioned attitudes, which is entirely possible in the dysfunctional world of UK retail banking, where recent scandals at the CoOp Bank are confusing and demoralising to everyday retail customers who increasingly see no point in saving at marginal interest rates and being badgered and patronised into the bargain. On the basis of my recent experience, the regulators, not for the first time, have got the balance wrong. Meanwhile the retail banks, such as Lloyds’ newly-rebranded TSB and about-to-be-resurrected Williams and Glyn’s need to prove themselves genuinely committed to relationship banking if some of the damage is to be repaired. The incident I refer to was not connected to any of the banks mentioned in this article, by the way, and I don’t think naming and shaming is particularly useful. But we face a dilemma: either the banks and regulators treat customers as customers or face the consequences. In my case, I will be changing banks, if I can find a least worse alternative.