“I meant what I said, and said what I meant, an elephant’s faithful 100 % - Dr Suess in Horton Hatches the Egg

In the first part of our series on shopping for legitimate banking alternatives, we exposed the sad truth about how most of us feel about financial service providers:

Almost a third of us don’t trust them, and yet we feel like there’s no alternative than sticking with the banking institutions we know. 

At the same time, we’re all out window shopping, am I right? We’re casting a curious glance around at the new generation of banking apps and products, and even the cryptocurrency platforms that swear to be an alternative to dodgy legacy banks. 

And every now and then, something catches our eye: a product that speaks to us personally and makes us believe that we, too, can escape from our financial woes. Perhaps it’s the saucy investment option? Maybe it’s the low-interest rates on loans? Or is it the flexibility to spend and send my money across the world at decent rates?

Whatever it is you desire and your prospective new app promises to deliver, deciding to migrate your finances is easier said than done. There’s much at stake, and it’s understandable if you feel haunted by the voices of doubt: 

Is it too good to be true? Isn’t it better to stick with the devil I know, rather than the devil I don’t? What if I fall prey to a scammy platform or a pyramid scheme?

 

And so, to guide you in judging prospective bank accounts and financial solutions, we offer you the following: an outline of the regulations that all legitimate financial institutions in the UK and EU (unless specified otherwise) are expected to stick to.

The Benefits of Banking on Good Terms with Regulators

There are several acts that all financial services in the UK and the EU are expected to abide by. Though it might be tempting to go with a provider that lets you onboard without even the most basic identity verification, there are significant benefits to you of opting for services that are safely regulated:

Regulations You Should Expect your Bank to Enforce

Yes, it’s a bit boring to talk about the regulations and paperwork, I admit. You’re welcome to bookmark this blog to use it as a checklist ‘once things get serious’ with a financial business. We won’t take it personally! 

Starting off your Banking Relationship on the Right Foot

To comply with anti-money laundering rules and regulations, financial firms have to check that:

  • customers are who they say they are, 
  • if they’re acting on behalf of another person, 
  • if there are any legal barriers (like international sanctions) preventing them from providing someone a service, 
  • and ensure that they can assist law enforcement with information requests. 

This goes for digital currency (cryptocurrency) services as well!

 

To comply with these, you should expect a legitimate bank to implement basic Know Your Customer (KYC) checks off the bat, which means asking you about your:

  • Nationality
  • Date of Birth
  • Residential address

Other info they might have to verify as you use their product/service include:

  • Your income
  • Your occupation
  • The source of your wealth
  • The economic purpose of your transactions 
  • The source of funds of any of your transaction 
  • Whether you are acting on behalf of yourself or someone else. For example, Bitstocks’ Gravity can only accept funds from parties who have been screened by our compliance onboarding systems. Put another way, the source of funds for a Gravity user needs to be themselves and not any third party.

Supporting Documentation

A legitimate service provider will ask you to provide them with documentation to confirm any of the information you’ve submitted to them. The type and extent of the required documentation will depend on your situation, based on the kind of info they need to verify, the sort of transaction you’re looking to complete, as well as national and personal considerations. 

In cases where the info is already verified by a regulated agency, like when you send funds from a verified bank account, additional documentation might be unnecessary. A simplified version of KYC might also be allowed in situations like where a once-off transaction below €10,000 is made, or a child’s trust fund is undertaken.

Being Faithful 100% (don’t Forge your Docs!)

I hate to sound schoolmarmish, but at this point we have to talk about the other side of the coin: 

If you expect financial services to be above board, you have to do the same in return.

Though it might be inconvenient, and sometimes feel intrusive, when a financial services provider requests documents to confirm everything about you up to your weight at birth (jokes!), it’s one of the unavoidable pains of ‘adulting’. Going against the stream on this one will not help, but hurt you big time!

Forging documents or manipulating any of the info you submit makes you guilty of the crime of fraud. And, believe you me, any compliance officer worth their salt will check and double-check the legitimacy of your paperwork or risk their own skins.

In July 2020, the New York State Department of Financial Services fined Deutsche Bank and two of its affiliates $150 million for “significant compliance failures” in connection to its relationship with Jeffrey Epstein as well as dealings with two other financial institutions. (Source: Compliance Week

Though there are other, innocent enough, reasons why your onboarding or transactions might be delayed (to prevent unauthorised access to your account, for example), any dodgy paperwork is likely to trigger an investigation and put your transactions on hold. 

Ps. Any regulated financial service is legally required to take specific actions when they detect or suspect criminal activity. Providers aren’t allowed to provide you with a reason for any such delays, whether they’ve picked up a dubious transaction, or simply need to double-check your information.

 

Faithful 100%

In Dr Seuss’s timeless tale Horton Hatches the Egg, the lovable elephant declares his devotion to his task:

horton

As with Horton, who ends up hatching lazy Mayzie’s egg while she flitters off to Palm Beach, taking the high road is generally the more difficult path. Though sticking to financial services that operate WITHIN the law doesn’t guarantee you profit or wealth, it sure gives you the peace of mind that the house of cards is not going to come crashing down on you.



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