Well, Whad'Ya Know...?

What am I going to do about my UK bank account? It’s become a dilemma facing every Brit going overseas, as well as those already living abroad and the many thousands of recent returnees.

For some clear straightforward advice, who better to turn to than that master of plain-speaking, Donald Rumsfeld.

There are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns; there are things we do not know we don’t know.

Now, I know DR didn’t have the plight of the British expat in mind when he coined these few choice phrases, nevertheless his words provide an accurate description of the situation in which all too many expats now find themselves vis-a-vis their banking arrangements.

Let me explain. Back in the good old days before the financial crash of 2008, before even the introduction of draconian anti-money laundering legislation post 9/11, (which has always impacted on the innocent at least as much as it ever deterred the guilty), it was generally deemed expedient for Brits going abroad to close their UK bank accounts, transfer their funds to their banks’ offshore subsidiaries, and then to open a local bank account in their new host country. An advantage of this course of action was that expats were able to prove to HMRC that they were living away from the UK; this meant that they would, in due course, become eligible for non-resident tax status and the financial benefits that came with such a label. So far, so good.

The trouble arose around a specific plank of the new anti-money laundering legislation known as KYC - Know Your Customer, which requires UK banks to identify their customers by, amongst other things, their UK postal addresses. The result was that British expats returning home, but without UK addresses and no longer holding UK bank accounts, were suddenly and peremptorily disenfranchised from the financial system.

The problem has been compounded ever since by just about everyone with a potential bearing on it, including the government and the banks themselves. The most recent HMRC judgement on non-resident tax status has done little to clarify qualifying conditions.

I’m told by the Financial Services Authority that “there are no FSA rules covering this area and the discretion as to whether a UK bank account can still be held open or opened without a UK address lies with each and every bank and what their internal policy and practice are.”

And yet when I knock on the door of the banks themselves, and ask them to explain their policy with regard to allowing a British customer to keep open a UK account whilst overseas, just three are willing to give me a straight answer. The rest either failed to reply, delayed replying, batted the question into touch, or hid behind their compliance departments who had inexplicably put a moratorium on the matter.

Why all the secrecy? Why not address the issue, effect a policy and implement it? Where customer loyalty has been demonstrated, why not return the favour, put the matter on the action agenda and acknowledge an obligation to serve?

You can read the personal accounts of expats who’ve had to do battle on this issue here. And you can read the numerous ways in which they have or will come a cropper for not having a UK bank account at some stage of their overseas’ adventure here. The list is depressingly long and the outcome is always the same - the loyal customer is cut adrift.

Meanwhile, there’s a new socking great boulder placed in the pathway of all returning expats. What happens to an expatriate’s credit rating when he or she is denied a UK bank account? This, after all, is what proves the reliability and steadfastness of an individual to other creditors. That’s one hell of a big known unknown and, as Donald Rumsfeld might say, this could turn out to be a thing we do not know we don’t know.

Expat campaign to know your bank as well as it knows you

Thanks to everyone who's filled in and submitted ExpatMoneyChannel's Offshore Britain questionnaire. Your answers and comments will help us campaign for a change to current banking regulations whereby British expats seeking to keep open their existing bank accounts when they move abroad, and/or open new UK bank accounts whist overseas, are barred from doing so.

It seems that whilst many Brits on the brink of moving overseas are told by some UK banks that they must close their onshore accounts and open new ones offshore, other banks are turning a blind eye and allowing pre-existing arrangements to continue. The situation is further confused because, whilst the government maintains that the banks are not legally prevented from offering products and services to British expatriates, the banks claim that to do so would put them in breach of 'know your customer' (KYC) regulations, which clearly state that they can only provide accounts to applicants providing UK postal addresses.

The collapse of the Icelandic banks in Guernsey and the Isle of Man dented the confidence of expats looking to start up a new relationship with a bank in an offshore location, such as one of the three finance centres that make up Offshore Britain, Jersey, Guernsey and the Isle of Man. In many cases, expats first put their toes into offshore waters on a trial basis and closing off the continuity of long-held banking arrangements and relationships early on is neither sought nor welcomed. In fact, there are far too many stories of the whole process of switching to a new bank taking far too long, endless teething problems in re-establishing standing orders and direct debits, and little by way of back-up when the new expatriate needs bank documentation to support a new tenancy application or open an account with a utility company abroad. And then there's the pure comfort factor of leaving savings and money management back on UK soil and familiarity of its regulatory environment. Who wants to turn their back on that? The ideal solution would be for expats, particularly working expats who plan to return to the UK, to keep their UK bank account as well as open an account offshore.

The obstacle lies with the existing KYC anti-money laundering regulation which place stringent demands on the banks to insist on various documentation and practice which proves the bank manager does, indeed, know each customer and their business very well. It is the unhelpful detail in this regulation that has to be challenged, whilst preserving a bank's awareness and understanding of its customers' financial comings and goings, and safeguarding its ability to detect money laundering and other illegal practices.

Our campaign needs your help. To begin with we need a list with examples of the kind of documentation you've been asked to produce to comply with KYC regulation when opening a bank account either back in the UK or overseas (including details you've been asked to provide when moving to an offshore branch of your existing bank). This, plus a note of the kinds of questions you've had to answer will enable us to build a complete picture of current practice. Please also let us know about any occasion when you were turned down by a bank and, if so, on what grounds. What are the banks saying to you, the customer? What documentation or ID do they insist you present to comply with KYC regulation? What services are they saying they can no longer provide you with if you become (or are already) an expatriate?

This campaign is not seeking to get around or transgress the current regulations but it will be appealing for modification that takes into account the expats' plight, highlighting why these rules go so against them. Keep us informed with your responses and we'll keep you informed with what's being reported back to us from the government authorities, the regulator and the banking sector. And if you haven't already filled in your Offshore Britain questionnaire, you can download one here.