The Treasury and regulators are joining forces to address alleged ‘de-banking’ practices.

In response to growing allegations of anticompetitive practices within the crypto and fintech sectors, the Australian Treasury, in collaboration with prudential and financial crimes regulators, is taking action to increase transparency regarding the closure of accounts held by corporate customers. 

This move follows recommendations from the Council of Financial Regulators (CFR) in August, which expressed concerns raised by digital currency start-ups about the increasing difficulty in accessing bank accounts, and the continued clampdown on crypto groups by banks and regulated payments companies.

The practice known as ‘de-banking’ involves banks closing accounts of clients considered high risk, and has raised eyebrows among affected businesses. 

These closures could go beyond the need to mitigate scams or money laundering, suggesting that banks may be motivated by a desire to stifle competition by preventing legitimate businesses from operating accounts.

The Treasury has outlined a collaborative effort with the Australian Prudential Regulation Authority (APRA) to establish a voluntary data collection system. 

This system aims to monitor the extent and nature of de-banking, providing regulators with valuable insights to inform future policy decisions.

Additionally, the Treasury says it will work closely with AUSTRAC to enhance transparency and fairness in banking services. 

This includes ensuring that banks clearly and proactively communicate requirements to both existing and potential customers before refusing or withdrawing banking services.

Treasurer Jim Chalmers says it is important to find a balance between supporting affected businesses and recognising that banks are commercial entities responsible for managing their own risks and resources.

Under the proposed measures, banks may be required to document reasons for de-banking customers, provide clear explanations to affected customers, and ensure access to bank dispute resolution procedures. 

Additionally, a minimum notice period of 30 days before closing existing banking services would be implemented.

Senate committee hearings have previously revealed the extent of the issue. 

Nium, a global payment company, stated that Australia was the only country among the 40 it operates in where bank accounts were closed without sufficient explanation. 

Similarly, Wise, a London-based company, accused Australian banks of anti-competitive behaviour by refusing to provide banking services over several years.

AUSTRAC has expressed concerns to the committee that de-banking practices would reduce visibility of transactions within the payments system and hinder efforts to monitor financial crime.