Managing Multiple Banking Relationships During Investigations
There are clear benefits to be had by adopting an approach that involves a number of banking relationships. As an example, one bank may offer particular expertise in an area of finance while others may have a strong presence in one or more countries, provide access to certain payment systems or be able to co-ordinate a range of transactions around the globe.
It is an arrangement that gives the customer access to services and expertise wherever they require them. It can also be the most efficient way of managing wealth.
Such a relationship, however, does not come without risks. It can lead to a dependence on particular banks and may even lead to reputational damage for - and even investigation of - a client if one of the banks they have dealings with is believed to be involved in illegal activity or faces financial problems.
If such circumstances arise and an investigation begins, anyone who has a relationship with the bank that is investigated has to know how to respond.
Response
In such a situation, there is a need for a risk management approach that is robust and comprehensive. Anything less than this may do little to manage the risks in question and may even hamper efforts to respond appropriately to the problem.
Great emphasis must be put on identifying the exact risks associated with the relationship with the subject of the investigation - and with any relationships you may have with other parties that are linked to those being investigated.
The correct approach will depend on the reasons for the investigation and the way it is being conducted.
But managing banking relationships in such circumstances will generally require three actions:
- Enhanced due diligence (EDD): Background checks on the bank being investigated, examinations of its anti-money laundering controls and analysis of its financial stability will be necessary in order to assess the nature of the risk and the extent to which it could affect you.
- Monitoring and reporting: Transactions need to be continuously monitored in an attempt to identify any suspicious activity. Reviews have to be carried out at regular intervals and procedures need to be in place for ensuring that anything that gives cause for concern is reported to the relevant authorities.
- Understanding the impact and nature of the investigation: There is obviously a need to understand the reasons for the investigation. But it is equally important for those who have a relationship with any of those under investigation to determine how it will affect themselves. This has to be viewed as a priority: it will help shape your response to the investigation itself (and any possible risk of litigation that results) and can show what measures could be introduced to prevent you becoming indirectly involved in any future similar investigations.
Arguably, the first two of these tasks should be carried out as a matter of routine, regardless of whether an investigation has begun. Any banking relationship has to involve an awareness of both the risks and the right response to minimising them once they have been identified.
Such measures can ensure that multiple banking relationships can be managed during investigations. But it should be emphasised that a lot of what is required in an investigation situation should have already been undertaken as part of ongoing attempts to identify and mitigate risks, protect your reputation and safeguard your financial stability.
Responding to Account Freezes Across Jurisdictions
Account freezing orders can be an effective way of ensuring assets remain available if they may need to be transferred after the settlement of a dispute. They are an interim injunction granted by a court that prevents a party from being able to dispose of (also known as dissipate) assets that are the subject of the order before a judgement has been enforced that relates to those assets.
The freezing order regimes in a number of countries are becoming more and more complex. The situation can be further complicated if account freezing orders are made that cover a party’s assets around the world. In such circumstances, the order is called a worldwide freezing order.
It is important that those who are the subject of one know how to respond. A freezing order can have major financial implications for someone who is the subject of one (who is known as the defendant). It can also cause the defendant severe reputational damage, as freezing orders are often viewed – not always fairly, as the allegations they are based on may later be disproved – as an indicator of immoral or even illegal behaviour. They can also cause the defendant financial hardship, as they can no longer access all their assets.
Options
If a defendant is subject to a freezing order, they have a number of grounds on which to challenge it.
These include:
- Lack of evidence: Arguing that the claimant (the person who has sought the freezing order) has failed to provide enough evidence to support their claim that there is a risk of the assets being dissipated.
- New evidence: The defendant may be able to produce evidence that shows the risk of assets being dissipated does not – or never did – exist.
- Unfair prejudice: Demonstrating the order unfairly restricts the defendant’s ability to carry out legitimate business activities or gain access to necessary personal expenses.
- Failure to disclose material facts: Arguing the claimant did not disclose crucial information and / or misled the court when applying for the order.
- Alternative security: The defendant could argue that alternative arrangements, such as security payments or guarantees by a third party, would be a better alternative to a full freezing order.
- Timing: It can be argued that the claimant has failed to pursue their claim in a timely manner and that this indicates there is no risk of assets being dissipated.
- Third parties: That the freezing order is causing unnecessary harm to third parties, such as business associates or family members, who have no involvement in the dispute.
Challenges
Bringing a challenge to a freezing order involves preparing and filing an application with the court. If the situation is one that involves more than one jurisdiction, the need for expert legal representation will be even greater.
Matters involving numerous jurisdictions can present particular challenges in relation to the obtaining of evidence and dealing with the relevant authorities. These challenges require an informed, robust approach that may have to be sustained through a number of legal hearings.
The options outlined above apply to freezing orders that apply to any jurisdiction. If a freezing order involves a number of jurisdictions, it is vitally important that the challenge to it takes into account each and every factor relating to any of the jurisdictions concerned.
Private Bank De-Risking: Your Rights and Options
What is de-risking?
De-risking, which is also known as de-banking, is the closing of an individual’s or an organisation's accounts by a bank because it believes that the account holders pose a financial, legal, regulatory or reputational risk to the bank.
Although it is referred to sometimes as de-banking (and we will refer to banks throughout this article), it is a practice used by financial institutions other than banks, such as brokers, credit unions and investment companies. They carry it out to reduce their exposure to certain types of customers or business activities that they believe carry a risk of money laundering and/or terrorist financing.
De-risking is an activity that is often initiated against a high net worth individual (HNWI) who is believed to have political, social and personal views that the bank considers unacceptable. It has serious consequences as it is extremely difficult to operate in the modern world without a bank account; especially if the subject of the de-risking has a lot of financial assets they need to manage on a day-to-day basis.
De-risking is not a rare occurrence. In 2024, the UK All-Party Parliamentary Group (APPG) on Fair Business Banking published a de-banking report. The APPG found that thousands of customers were being de-risked every month.
Rights and Options
Being faced with a lack of banking facilities as a result of de-risking is a challenge. But individuals and organisations can take steps to address this or reduce its effect.
A bank’s decision to de-risk could be challenged legally. Depending on the exact nature of the contractual arrangement between the bank and the de-risked customer, it could be argued that the de-risking is a breach of contract. It could also be claimed that it is a discriminatory action if the de-risking is believed to have been carried out because of the customer’s political views.
Such an approach, however, may have a limited chance of success. The bank is unlikely to agree that it has made an incorrect decision and it will probably not be prepared to provide detailed information about the reasons for the account closure.
Someone who feels they have been de-risked unfairly could lodge a complaint with the Financial Ombudsman. This could lead to dispute resolution services being employed in an attempt to produce a negotiated settlement that is suitable to all parties.
De-risking, however, can be a prompt for individuals and organisations to examine alternative banking services and the opportunities offered by the increasingly large fintech sector. Online banks, specialist payment services and even cryptocurrency platforms can be an effective “Plan B’’ for those whose financial activities have been limited as a result of being de-risked by a bank.
Addressing The Issue
Many who lose the use of a bank account as a result of de-risking will, understandably, feel aggrieved. They may feel they have been targeted unfairly or have had their views misunderstood by the bank.
But it may be possible to restore the bank account by removing the underlying problem. If the issue that led to the bank making its de-risking decision can be addressed, there is the possibility that the banking relationship can resume.
Each de-risking case will have its unique characteristics, so it is unlikely that a one-size-fits-all approach will be of much use. But, in simple terms, establishing what the problem was and taking relevant steps to put it right and / or correct any misunderstandings will go a long way towards convincing the bank that it would face no problems if it restored the banking relationship.
It should be emphasised that this may not be straightforward, especially if the bank is unwilling to disclose much information about the reasons why it took the decision to de-risk. But working with relevant specialists – for example investigators, PR professionals and search engine optimisation experts – can enable the problem to be identified and managed in a way that satisfies the bank.
If that outcome is achieved, great emphasis should then be placed on the need to prevent the problem arising again. This will require regular reviewing of activities, statements and relationships, so as to ensure there is nothing that gives the bank cause for concern in the future.
Protecting Banking Privacy in an Online Era
Banking privacy is far more than simply a concept that needs to be adhered to – it is what the financial system depends upon.
A brief run-through of the benefits of banking privacy illustrates this.
Banking privacy:
- Boosts trust and confidence among customers and within the banking sector in general.
- Improves the standard of service for customers.
- Protects customers.
- Reduces the risk of data breaches and minimises the harm if such a breach does occur.
- Ensures banks are meeting their compliance obligations and are acting responsibly.
Protecting banking privacy is not something that can be done in an instant or completed with a single action. And it requires commitment from both a bank and its customers. That, arguably, is the case now more than ever before, in this era of online banking and rapid transfer of digital data.
Banking privacy involves a combination of strong security measures, banks’ compliance with the law and regulations that apply to them, and banking customers knowing what they need to do to keep their banking details safe.
Security measures
Banks have to ensure that data transmitted between customers and banks is encrypted and that multi-factor authentication is being used to ensure that security is not dependent on just one or more passwords. They also need to make sure their premises are physically secure and covered by surveillance.
Systems need to be in place so that potential security threats can be identified and responded to immediately by banks. Data loss prevention systems have to be used to make sure sensitive information is not lost. Any computer systems in banking need to be secure, using up-to-date software and be employing rigorous verification procedures before they can be used.
Compliance
Banks have to comply with the General Data Protection Regulation (GDPR), which contains rules relating to how personal data is processed and the control people have over their personal information. While this is a European Union regulation, the UK has its own version.
The United States has the Gramm-Leach-Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, which protects the privacy of consumers' personal financial information held by financial institutions.
Banks will often employ a data protection officer to ensure they are meeting the obligations such measures impose on them and to communicate with banking’s regulatory bodies. They will also conduct data protection impact assessments to help identify and remove possible risks to personal data.
Customer Knowledge
Banks need to be telling customers how they collect, use and protect personal data. But they should also be providing customers with ways in which they can manage their own privacy.
The banks have to explain to customers about the importance of using safe online banking practices. These include creating strong passwords, protecting those passwords and PIN numbers, using secure internet connections and carefully checking bank statements to ensure they show nothing suspicious.
Customers also need to be aware of the dangers of criminals’ phishing attempts. Phishing is a type of cyberattack where efforts are made to trick individuals into revealing sensitive information that can be used to deprive them of their wealth. It is a recent phenomenon. But it shows how the ways in which privacy is protected have to change as the threats to it develop.
Maintaining Access to Wealth During Investigations
It can be a challenge to ensure that you have access to your wealth during an investigation.
That wealth (and your access to it) will be subject to scrutiny by investigators. They will not want to run the risk of anyone under investigation taking an opportunity to take assets ‘from under their noses’ and so will do what they think is necessary to prevent any access to it that could lead to it being moved. For this reason, they may apply to the courts to make that wealth subject to a freezing order.
It should be emphasised that freezing orders can – if the right approach is taken – offer some scope to gain access to the wealth that is the subject of the order. A freezing order can be varied to allow for living and legal expenses. While they are sought to prevent any assets being disposed of before any criminal investigation or civil litigation has been concluded, there is the potential to ensure that the subject of one is not totally cut off from their assets and is still able to finance their day-to-day activities.
When it comes to keeping assets away from those who had owned them, many of the headlines in the UK have been devoted to unexplained wealth orders (UWOs). UWOs are a far-reaching measure and can place huge restrictions on a person’s right to have access to anything they own. They were introduced to the UK legal system in January 2018, with the passing of the Criminal Finances Act 2017, and require a person to explain how an asset was acquired.
If that person does not provide an adequate explanation or provides unsatisfactory evidence, the asset will be considered “recoverable property” by the authorities for the purposes of a civil recovery order under the 2002 Proceeds of Crime Act. A UWO can be sought without any civil or criminal proceedings having begun. There is also no need for the subject of a UWO to have been convicted of an offence or to have had a civil law judgement against them.
UWOs are, therefore, a powerful tool for the authorities – and one that can make it difficult for a person to have access to their wealth. Yet they have been rarely used since they came into UK law. Only nine UWOs were successfully obtained in the first five years they were available to the authorities.
But whatever order is being sought to restrict a person’s wealth due to a current or pending investigation, that person needs to know how best to manage the situation.
Strategic
Anyone faced with the prospect of not being able to use their wealth as it is subject to investigation must take a strategic approach. A number of things need to be done to try and remove or minimise the problem.
The first is to seek representation from a legal firm that has experience (and a successful track record) in this area of law. Such lawyers will recognise what scope there is for having a freezing order removed or at least amended so that the person can gain some access to their assets.
Secondly, it can pay to take an approach with the authorities that is based on openness and cooperation. While it may be tempting (and a natural reaction) to offer little or no assistance to those who have stopped you having the use and benefit of your wealth, some degree of success can be gained by being helpful.
Giving investigators a full explanation of your financial situation and the ways in which you have obtained your wealth is unlikely to see them drop the freezing order in the near future. But it may persuade them to alter its terms so you have some access to what is yours. Taking the time to explain any payments that have been made and the need to make others in the future will also help achieve this.
There is also a need to record your wealth and keep all documentation that relates to it. This will, obviously, give you a means of proving your ownership of it. But it may also be of practical benefit when it comes to showing that some or all of your wealth has no connection to the investigation that is ongoing or looks likely to begin. This could be important in helping secure access to that wealth. For this reason, it may be worthwhile using the services of an expert in financial data who can highlight the main issues and explain the situation to investigators.
All of these steps will put you in the best possible position to argue the need for you to have access to your wealth, even though it may be attracting the attention of investigators. Managing your reaction to an investigation while also trying to gain such access requires strategy and proactivity – and an ability to know how best to use them.
