From January 2018 banks and building societies will need to carry out immigration checks on existing current accounts in a further move to make it harder to live and work illegally in the UK.
The Immigration Act 2014 and 2016 requirements
The Immigration Act 2014 prohibited firms from opening current accounts for people who don't have leave to remain in or enter into the UK. The Immigration Act 2014 has been amended by the Immigration Act 2016 and these amendments come into force on 30 October 2017.
There will be a number of additional requirements on firms including a requirement to carry out periodic checks of the immigration status of existing current account customers. This will include accounts opened before the 2014 Act prohibition came into force and will encompass situations where accounts may have been opened during a period of lawful stay but where the migrant has remained in the UK after their leave has expired.
The first immigration check is required to be carried out for the quarter beginning on 1 January 2018. Firms will be checking for accounts operated by a disqualified person (i.e. a person who is in the UK but who does not have the required leave to enter or remain in the UK).
The firm must then inform the Home Office if any account is identified and the Home Office will then carry out a check. The Home Office will have a range of options including requiring firms to close the account as soon as possible and power to apply to the Court to freeze an account until the individual leaves the UK.
The Immigration Act 2014 (Bank Accounts) Regulations will be amended to extend the Financial Conduct Authority (FCA) duty to monitor and enforce compliance with the new requirements. The FCA is currently consulting on its approach to the amended Immigration Act and regulations including reporting, monitoring and enforcement.
What do you need to know?
Cifas is the sole provider of access to the Home Office's list of 'disqualified persons'. Under the Immigration Act 2014, firms are required to carry out a ‘status’ check with Cifas. These need to be done before opening a new current account operated by a consumer, micro-enterprises or) a charity (with an annual income under £1 million).
Where the check identifies that the applicant is a disqualified person, firms must refuse to open the account. This prohibition includes:
- opening joint current accounts for any disqualified persons
- opening a current account where the disqualified person is a signatory or is identified as a beneficiary
- adding any disqualified person as a current account holder, signatory or identified beneficiary in relation to an existing current account
Where firms refuse to open a current account due to concerns the person is a disqualified person, the firm must tell that person the reason for the refusal (as long as doing so does not conflict with obligations under other legislation e.g. Anti-Money Laundering legislation). Particular wording has been prepared by the Home Office which can be used where firms have refused an account.
In terms of existing accounts, from 1 January 2018, firms will also be required to carry out quarterly immigration checks (again using the Cifas database) and any accounts found to be operated by a disqualified person must likewise be reported to the Home Office.
What do firms need to do?
- make arrangements to comply with the Immigration Act 2016 and ensure that the relevant checks are put in place and employees are aware of the obligations and receive the necessary training;
- put in place record-keeping procedures so that they can demonstrate compliance with the Immigration Act 2016 to the FCA. Firms will need to keep these records for at least 5 years. Firms will also need to confirm to the FCA each year that they are complying with their obligations under the Immigration Act;
- terms and conditions will need to be updated in order to take account of the new quarterly checks; and
- any issues with compliance will need to be reported to the FCA in the usual way.
Implications if the Immigration Act
This will place yet a further obligation on firms to monitor account activity. Appropriate systems and checks will need to be put in place to ensure compliance with this new obligation. Industry experts have expressed concerns that these requirements will make it harder for legitimate customers to open bank accounts.
Questions have also been raised about where liability will lie if things go wrong. In circumstances where a search brings up a number of names this may lead to the incorrect bank accounts being frozen or closed which could lead to claims being issued against firms. Appropriate records will need to be maintained to show why decisions have been made in order to evidence a firms compliance with the act.
Firms will also need to ensure its policies and procedures are clear and comply with other legislative requirements.