Gov, regulators and banks to make moves on debanking

The government has backed a closer watch on debanking, the controversial practice of cutting risky fintechs such as those working on cryptocurrency off from banking services.

It will now work with regulators, banks and impacted industries to implement a response to the issue.

The response is informed by recommendations [pdf] from the Council of Financial Regulators (CFR) in partnership with AUSTRAC, the ACCC, and the Department of Home Affairs, which were made in October 2022 following a senate committee report.

The government said in its own response [pdf] this week that it recognises “the seriousness of debanking”.

It has backed the need for clear and insightful data on occurrences of debanking in Australia.

The government said it “views data collection to be a fundamental aspect of the response to debanking.”

“The data will enable monitoring of the extent and nature of debanking and help inform any future policy formulation and monitoring," it said.

“Treasury will work with APRA and the four major banks to design and scope the voluntary data collection to ensure the data collected is useful and the process is iterative.”

It agreed "in principle" with other CFR recommendations, which included having banks outline the reasons for debanking a customer,

These measures include banks outlining the reasoning for debanking a customer, ensuring the customer has access to dispute information and providing at least 30 days’ notice of closing accounts.

The government also “expects banks to communicate their requirements to both existing and potential customers clearly and proactively prior to refusing or withdrawing banking services.”

“The government encourages the major banks to publish information on their requirements and risk tolerance of the digital currency exchange, fintech and remittance sectors,” it stated.

It will haveTreasury “work with banks and AUSTRAC to ensure the measures in this recommendation are implemented to the greatest extent possible.”

The government also said it “notes” a capability uplift recommendation advised by the CFR, which calls for funding for education and guidance to fintech, digital currency and remittance sectors, all of whom may be threatened with debanking.

“The government will now work closely and iteratively with regulators, banks and the affected sectors to ensure that the implementation of the agreed upon recommendations is effective and achievable.”

Australian Banking Association responds

An Australian Banking Association (ABA) spokesperson told iTnews it “will consider" the government's response.

The ABA spokesperson said banks take their anti money laundering regulatory obligations very seriously and “will continue to take a risk-based approach to how they operate and the customers they serve.”

The spokesperson said since the CFR offered its advice in August last year, “a number of significant events have rocked the crypto industry.”

“These events point to a clear need to maintain vigilance and a risk-based approach when dealing with digital currency exchanges," the association said.

“The ABA welcomes the government’s intention to license payment providers and digital currency exchange providers as part of its modernisation of Australia’s financial system.  

“In relation to the recommendation for banks to provide reasons for debanking a customer – we note this can be at odds with the anti-tipping off provisions in the regulations.

"Banks welcome the government’s commitment to work with AUSTRAC and industry to find the best way to implement this recommendation.”

The ABA spokesperson added Australian banks “will continue to engage with government and regulators in further policy work on this issue.”