Why is it so hard to open a bank account in the UK?
I think it’s hard to overstate how primitive and ass-backward the UK banking system is if you come from another first world (or, hell, probably a lot of third world) country. When my family moved there for a couple of years in the early eighties they were still transferring branches by moving physical ledger books from safe to safe. When I worked there in 2000 I opened an international account from overseas, and then couldn’t perform basic account functions until I moved the branch from the centralised international customer centre to the local physical branch – simple stuff like ordering a chequebook and so on all had to be done via ‘my’ branch – I couldn’t just walk into a branch and do stuff. Most vexing, my regular international money transfers could only be accomplished in person, at a branch, with staff who found the whole idea novel, and needed the process explained to them every other time. There’s no EFTPOS network, but that’s more common, I guess; the overall feeling I got wa
I think it’s an historical thing. I opened a UK bank account in 1985 or so, which I think was before banks had to comply with anti money-laundering legislation. You approached the bank manager as a supplicant with your passport and details, and if you were lucky he would deign to grant you an account. I know a lot of people who didn’t use banks at all for normal transactions: the Post Office had a much more convenient setup for small deposits and withdrawals. In fact, if you didn’t have a mortgage there was no need to have a bank account at all.
UK saving accounts almost always have an automatic overdraft attached. Hence, giving someone a bank account is like giving them credit and hence banks are reluctant to give accounts to unreliable or unknown people. (It may also be simple tradition / “that’s the way it’s always been done”. I got my first UK bank account after a several days of unsuccessful tramping around into banks. Offering to open it with a substantial balance was insufficient, as was any proof of money in accounts overseas. Eventually Barclays gave me one after sighting my passport and a letter from my employer. Caveat – this was some years ago, things may have changed.
One area where UK banking actually is tightly regulated is money laundering. Some banks are better controlled than others, however they all must adhere to the regulations set out in both UK law and the EU Money Laundering Directive (more over at the Financial Services Authority website). For the same reasons, electronic money (eMoney, eCurrency, etc) is heavily controlled – unlike many other countries, buying pre-paid Visas/Mastercards generally requires registration and an identity check once you load a certain amount of money on to it or make a certain number of transactions. Some providers even do checks at application stage. One popular ID check provider is Call Credit ML (Money Laundering). It is similar to credit check services provided by Call Credit, but focussed more heavily on ID verification than credit score. It’s quite an in depth topic but hopefully this reply will give
While it is true that a lot of documentation is required to open accounts, perhaps justifiably, in our experience there is also the following X-factor: service at many UK banks is shockingly bad. Numbered anecdotes: 1) It took 3 months to get an ATM card for my account. 2) It took another 2 months, five visits to the bank, and about 4 hours of speaking to representatives to add my wife to the account. 3) It took a colleague 3 months to be able to withdraw any money from his new account… because the branch at which he opened his account underwent refurbishing and no other branch, nor the bank headquarters, would help him until his home branch reopened. Oh, sure, they took deposits just fine during this time. 4), 5), 6): similar 1-3 month hassles for friends from Britain, Japan, Germany. In all cases, the reasons for the above nonsense were not due diligence, or security concerns, but documents being repeatedly “lost” in the mail by the banks, admitted mis-communication between branche
