Money-laundering measures leave undocumented migrants behind

This blog post was written by PICUM’s Advocacy Trainee Emer Connor.

The ability to open a bank account, and the financial autonomy that comes with that, is something that many people take for granted. Cash is becoming increasingly redundant in society as more and more transactions are made via bank card or online payments. Many brick-and-mortar businesses enforce card-only policies, with smaller businesses and street vendors increasingly embracing the cashless model. In a Swedish banking survey last year, 87% of those surveyed said they paid for their last purchase via card, while only 13% used cash. Alongside this trend, it is becoming progressively more difficult for people without documentation to access basic banking services, meaning many people are excluded not only from financial services, but all services that necessitate an online payment. Across Europe, people who cannot access banking as a result of being undocumented (or in the asylum system, or homeless) are unable to receive payment for work, labour compensation after cases of exploitation, transfer money, save securely, access money lending services, in some cases rent accommodation or make online payments. Often, visa or residency applications involve some kind of proof of finances, which is near impossible without a bank account.

In some countries this financial exclusion appears to be a by-product of the tightening of measures to prevent money laundering, in others it is a calculated policy to deter migration- as in the UK’s “hostile environment policy”. The frightening effectiveness of this policy in creating fear and mistrust was seen in the aftermath of the 2017 announcement by the British government of the proposed plan to search for and freeze the bank accounts of anyone residing in the UK without permission. The exclusion of certain groups from banking services can have detrimental social effects. In recent years the Chinese community in Paris has been targeted for muggings, according to some because they are perceived as likely to have large amounts of cash on their person, and are less likely to report the crime for risk of detection by immigration authorities. During the 2016 trial of three youths accused of 11 attacks in a three-month span in Aubervilliers, a Parisian hub of textile whole-sellers, the defendants reportedly admitted targeting Chinese people for muggings as they believed they were likely to be carrying a lot of cash. In the event of an unforeseen medical or emergency expense, people without restricted access to banking services may be forced to turn to predatory lenders or live without a safety net.

Barriers for undocumented people in the EU

Restrictive banking policies currently affect undocumented people in a number of ways. Different conditions are imposed from bank to bank. However, in general all European banks require a form of ID and proof of address to open a basic bank account. While these may sound like minimal requirements many undocumented people do not have an official ID for various reasons. They may be unable to contact their national authorities without risk of endangering themselves, have lost or had their ID seized by police, or be unable to travel to renew their passport. In a number of countries (including Belgium, Denmark, Finland, Germany, Greece, the Netherlands and Spain), PICUM members report high levels of confusion and discrepancies from banking staff around which documents can be accepted as proof of identification.  In Belgium, banks often add and change their list of required documents, sending people back and forth until they give up. In Ireland, most banks require proof of address and an identity document, but some may ask for a PPSN (social security number) for certain services, and people may be reported to immigration authorities when applying for a PPSN.  Such discrepancies and implied risks further dissuade people from using banking services.

In some member states, undocumented people face further administrative barriers.

Many Finnish banks request a personal identity number (which is linked to residence status) or proof of regular employment. While in Denmark, you will need a residence permit and a CPR (social security) number issued by the state as well as a registered address. As a migrant, you could be caught in a bureaucratic trap. An employer will ask for a bank account and a residence card, but you may not get the card and the account before you have a job contract approved by the state. Similar practices have been reported in Germany, where banks usually require a valid passport, a certificate of residency and, in many cases, a work permit. In Greece, a letter from an employer is requested to open a bank account. In Spain, some banks may require a ‘Certificado de Numero Residente’ or ‘non-resident certificate’ for basic non-resident accounts, which can be obtained from a police station. Undocumented people have a right to apply for this certificate, but must do so through the local police. This can deter people living without documentation, who may fear police contact could trigger arrest, detention or deportation. Minimum balance requirements are also enforced by some banks. These restrictive policies by banks act on top of multiple other barriers such language difficulties and issues around trust in institutions.

The implications of EU law on banking requirements

Requirements to open basic banking services in Europe are generally regulated by the customer due diligence procedures outlined in Article 13 of EU Directive 2015/849 and the previous Anti-Money Laundering (AML) regulatory instruments. EU law obliges banks to verify the customer’s identity on the basis of data or information obtained from a reliable and independent source. However, it does not specify what constitutes ‘reliable and independent sources’. Banks may often require official documents, like passports, national identity cards to verify a customer’s identity, but it is down to each individual bank, or national law to determine and clarify the spectrum of documents they can accept. EU law also enforces a risk management model which allows banks to adjust the documents required based on a risk assessment of the customer. In cases where clients cannot meet all criteria, banks may offer them a more limited product, i.e. a basic banking account. Banks thus have the option to offer a more limited service to customers who are unable to produce full identification requirements. It is up to each bank to clarify the forms of identification required for each risk level.

The  European Union Payment Accounts Directive (PAD) was adopted in 2014 with the main aim of improving the functioning of the EU internal market for payment accounts and facilitating an ease of cross border financial mobility. The provisions of the PAD apply to payment service providers and oblige them to ensure basic payment services are accessible without “discriminat against customers legally resident in the Union” (Article 15). Thus, the PAD neither obliges nor forbids states to allow access to undocumented persons. Article 16, nonetheless, adds that those with no fixed address, asylum seekers, and those who are without residency but “whose expulsion is impossible for legal or factual reasons” have the right to open and use a basic account. This protects the rights of access to basic banking services for people with asylum seeking status (special banking products are available for people with asylum status in the Netherlands and Finland, for example). However, the directive does not oblige banks to offer services to undocumented people, who often remain excluded.

For instance, in Belgium, the ‘Code of Economic Law’ requires banks to provide basic banking services to regular residents in Belgium , while the Anti-money Laundering Law 2017-10-06allows banks to determine a customer risk level and set their own bar for documentation. If a non-citizen client does not hold a passport or identity card, Belgian banks may accept a document issued to them by Belgian authorities that is listed in the annexes to the Royal Decree of 8 October 1981. In practice, this means that people with asylum or temporary statuses should be able to access banking services, but there are no provisions guaranteed for people living without any documentation. Banks in Belgium can terminate a basic banking service account if the customer is no longer regularly residing in a member state of the EEA. Increasingly in Belgium, individuals’ accounts are being automatically blocked when the residency card they used to open an account expires, despite having since obtained a new residence status. It is common for a person’s functioning bank account to be frozen after their asylum is rejected and they no longer receive benefits through CPAS (Public Centre for Social Action) or reception centre.

Many undocumented people make do without bank accounts. However, in recent years banks have been targeting this large pool of people excluded from standard banking services. Many American banks accept ITIN’s (individual taxpayer identification numbers) in lieu of social security numbers, and mortgage approval rates for undocumented people are on the rise. There are increasing numbers of financial institutions that incorporate ‘financial inclusion’ into their ethos, many of them being online banks that allow users set up an account online with a picture of their passport and a selfie. A 2017 Financial Action Task Force Report examines initiatives applied in various countries which demonstrate that solutions can be found to provide access to regulated financial services to unserved and underserved people, while complying with customer due diligence requirements. The report cites basic banking products offered in India, Mexico and South Africa. In Mexico for example, banks offer a low risk account with restricted services, for which identification criteria may be exempted and a lower risk account with more services, requiring only basic client data (name, place and date of birth and gender and address). Some South African banks make allowances for proof of address requirements, as many people live in informal settlements where there are no means to confirm physical addresses.

The gravity of the impact of the exclusion from banking services will depend to a large extent on the prevailing level of financial exclusion in a country. Across Europe, financialization is on the rise, and financial services become more and more a part of daily life. Rising financialization will lead to increased economic and social exclusion for those left unable to access basic services.  This will impact on undocumented workers’ ability to receive payment and make enforcement of compensation in cases of labour exploitation even more difficult. Banking should be considered an essential service and regulated for as such, so that no one is excluded on the basis of residence status.

Publications on financial exclusion:

Bayot, Bernard 2016, Working Paper: Social, Economical and Financial Consequences Of Financial Exclusion

Anderloni, Luisa & Vandone, Daniela (2006) Migrants and financial services

FATF Guidance, 2017 “Anti-Money Laundering and Terrorist Financing Measures and Financial Inclusion”

Mastercard, 2016, Survey on financial inclusion:

World bank, 2018, Statistics on financial inclusion;

BBC News, 2016, “A killing in Paris: Why French Chinese are in uproar”

Dubbed the ‘Walking ATM Phenomonen’ in: Barranco RE, Shihadeh ES, 2015 ‘Walking ATMs and the immigration spillover effect: The link between Latino immigration and robbery victimization.’, 52:440-50

Martin, Nathalie, Giving Credit Where Credit Is Due: What We Can Learn from the Banking and Credit Habits of Undocumented Immigrants (2015). 2015 Michigan State Law Review 989; UNM School of Law Research Paper 2015-08. Available at SSRN: https://ssrn.com/abstract=2587436 or http://dx.doi.org/10.2139/ssrn.2587436

Based on feedback from PICUM members: Fairwork, Belgium; Maison du Peuple d’Europe, Belgium; Evangelical Church, Finland; Refugees, Welcome, Denmark; Fundamental Right Platform, Greece; Pro Igual, Spain, Fairwork NL, Platforme Mineurs in Exile, Belgium

See Finland guide to visas

See European Banking Authority, 2016 “Opinion of the European Banking Authority on the application of customer due diligence measures to customers who are asylum seekers from higher-risk third countries or territories:”; European Commission, 2019, “EU legal framework on anti-money laundering and counter terrorist financing”.

Article 13, EU Directive 2015/849

Art 16 “consumers  with no fixed address and asylum seekers, and consumers who are not granted a residence permit but whose expulsion is impossible for legal or factual reasons, have the right to open and use a payment account with basic features with credit institutions located in their territory. Such a right shall apply irrespective of the consumer’s place of residence” PAD Directive 2014/92/EU

  In the Netherlands a group of the largest Dutch consumer banks came together under a Covenant, recognising their social responsibility to offer as many people as possible easy access to (non-cash) payment transactions. Since 2001 they have offered a package of primary payment services to every adult with a fixed place of residence or residence in the Netherlands, or with a postal address at an assistance agency recognised under the Covenant (the reception and accommodation agencies for asylum seekers), and whose identity can be established and verified in accordance with the Money Laundering and Terrorist Financing Act (Wwft).

In Finland, asylum seekers have access to a prepaid card, which allows them to receive benefits but does not work for money transfer or online transactions. While it is possible to keep using it after an asylum application is refused, the account is often blocked.

Book VII, Title 3, Chapter 8

Law on the prevention of money laundering and the financing of terrorism and on the limitation of the use of cash 2017-10-06 http://www.ejustice.just.fgov.be/cgi/article_body.pl?language=fr&pub_date=2017-10-06&numac=2017013368&caller=summary

Royal Decree of 1981 on access to the territory, residence, settlement and removal of foreign nationals

  Information provided by Fairwork Belgium and Plate-forme Mineurs en exil – Platform Kinderen op de vlucht

https://www.self.inc/blog/can-undocumented-immigrants-build-credit; https://www.marketplace.org/2017/09/11/american-dream-how-undocumented-immigrants-buy-homes-us/

Fintech startup Monese for example was created with migrants in mind. Monese is regulated by the FCA in the UK and looks very much like a regular bank but does not have a bank license, being only regulated as electronic money. Users can open a bank account with just a photo of their passport and a video selfie. Monzo, another popular UK start up ebank focus on financial inclusion and plan on publishing guides to help refugees, recent immigrants and people with no fixed address get bank accounts with Monzo.

See annex 5; http://www.fatf-gafi.org/media/fatf/content/images/Updated-2017-FATF-2013-Guidance.pdf

For example http://finmark.org.za/the-mzansi-bank-account-initiative/