Immigration Act – status checks for bank account customers

Background

From December 2014, the Immigration Act 2014 (IA) prohibited banks and buildings societies from opening a new current account for people who are in the UK but do not have UK immigration permission – defined as ‘disqualified persons’. This is unless the bank or building society has carried out a status check that indicates the individual concerned is not a ‘disqualified person’.

Institutions can carry out the immigration ‘status’ check with a specified anti-fraud organisation or data-matching authority (CIFAS). To the extent this check confirms that the relevant individual may indeed be ‘disqualified’, the bank or building society must notify the Home Office, which will confirm the status. Once this is confirmed, the firm must refuse to open the account and notify the person of the reason unless it is unlawful to do so. The Home Office has produced information, including a particular form of words, for firms to provide to individuals who are refused an account in those circumstances.

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; and
• adding any disqualified person as a current account holder, signatory or identified beneficiary in relation to an existing current account.

The Immigration Act 2016

The IA was subsequently amended by the Immigration Act 2016. Those amendments came into force on 30 October 2017 and introduced additional checks which must be undertaken in relation to individuals who hold specified accounts with certain financial institutions in the UK, and extend the checks that have to be undertaken for new accounts in order to comply with the requirements of the IA.

Extension to the requirements of the IA 

From 30 October 2017, the definition of ‘account’ for both the IA and the 2016 Act will be “all financial products by means of which a payment is made”. Home Office guidance is expected but it is currently believed that this definition will include current accounts, savings accounts, joint accounts, credit card accounts, loans and mortgages. If this is correct and mortgages are indeed included, mortgage providers will shortly fall within the requirements as well as banks and building societies. 

New requirements for existing current accounts

In addition to the existing requirements for new current accounts, the amended IA requires financial institutions affected by these provisions to carry out quarterly immigration checks on certain (existing) accounts in order to check whether there are accounts operated by or for a ‘disqualified person’. The check must also be carried out through CIFAS and the first one must be carried out in the quarter beginning 1 January 2018. This requirement does not apply to an account that is operated by or for an individual who is acting (with respect to that account) for the purposes of a trade, business or profession.

An individual would be identified as a disqualified person if their details match the Home Office’s immigration record on CIFAS. If some but not all of the details match, the financial institution may wish to make further enquiries regarding the account holder to ascertain whether the individual may or may not be a disqualified person.

If a financial institution identifies that an account holder, signatory or beneficiary of an existing account may be a disqualified person, the financial institution must notify the Home Office and await further instructions from the Home Office in relation to the next steps. In the meantime, the financial institution may continue to operate the account and provide other services, as normal.

The Home Office may apply a freezing order to the relevant account or, in circumstances where it decides not to, notify the institution that it is under a duty to close the account as soon as reasonably practicable. The Home Office will provide specified information in order to enable the institution to comply with its obligations. The institution may delay closing the account for a reasonable period, either to seek repayment of an overdraft or to mitigate the effect of the closure on third parties. All services provided by the financial institution to the disqualified person must cease upon closing the account. Once closed, the Home Office must be notified of the action taken via a prescribed website.

Practical implications

Institutions are required to notify customers that they are using their personal information to undertake checks through CIFAS and that any action taken by the firm will comply with the FCA’s ‘Treating Customers Fairly’ principles. 

Firms will need to ensure that they have adequate policies and record-keeping procedures in place in order to meet these requirements within the prescribed timeframe. As part of complying with the regime, it will also be necessary make an annual compliance declaration to the FCA for both new and existing accounts which fall within scope.