Peers have revealed that their political work is causing their children to be denied bank accounts under draconian money-laundering rules.
Lords revealed how financial institutions are threatening to drop them as customers if their family members do not agree to comply with intrusive checks.
Their testimony comes after The Telegraph disclosed that ministers are set to scrap controversial EU rules on “politically-exposed persons”.
The controversial rules require banks to carry out “enhanced” checks on public figures like politicians, diplomats, army leaders and even royals.
Lord Sharkey, a Liberal Democrat peer, revealed how they had been used to demand personal financial information from his three children.
The former adviser to Nick Clegg said he ran into trouble with NS&I, the state-owned savings bank, after the new rules were introduced in 2016.
“I was very surprised when it wrote to me demanding very much more detail about my finances and sources of funds,” he said.
“My three children were even more surprised to get the same letter. They did not even have NS&I accounts, which showed overzealousness on the part of the organisation.”
He said that when he complained the bank told him they were obliged to collect the information and he must “comply or we will close your account”.
Lord Sharkey said that he only resolved the problem by getting the Treasury to intervene, and that he was “lucky” he was dealing with a state-owned bank.
He urged the Government to take tougher action to make sure that the Financial Conduct Authority, the City watchdog, stops such abuses of the rules.
“The existing guidelines are perfectly all right. The problem is the financial institutions are not following them and the FCA is not enforcing them,” he told The Telegraph.
Lord Forsyth, a Tory peer, revealed that his daughter had been asked if she would move her account as a result of being related to him.
Lord Forsyth, a Tory peer, revealed that his daughter had been asked if she would move her account as a result of being related to him.
The former Cabinet minister under Sir John Major said the pair were both Coutts customers – the same bank that recently cancelled Nigel Farage’s account.
He recalled that a manager asked her: “Is there any chance that you could move to another bank because you are such a pain to look after because your dad is a politically-exposed person?”
“In my view, that is an absolute disgrace. Our children find it difficult to get mortgages. People find it difficult on probate,” Lord Forsyth said.
Lord Kirkhope, another Tory peer, said that one of his sons had been denied a bank account after they revealed he was their father.
He recalled: “Everything was going swimmingly until someone contacted him and said ‘are you by any chance related to a Lord Kirkhope?’ He said yes.
“He then received a communication some two weeks later telling him that his application for an account had been declined. It was obvious why.”
Baroness Kramer revealed that she was asked for proof of her dead husband’s income when she tried to open a savings account with Chase UK.
“My husband died 17 years ago and I do not know how many people still have their payslips from 17 years ago, never mind those of a dead spouse,” she said.
“It just seemed so intrusive and so silly. I told them, frankly, forget it, withdraw my application,” she told The Telegraph.
She also revealed that her sister-in-law had even been flagged up when trying to open an account in the US because they were related.
Like many Peers she expressed suspicions that many banks are outsourcing PEP checks, adding that “an industry has grown up around this”.
Banks have insisted that they are just following the guidelines set down by the City watchdog.
Senior MPs expressed concern over the rules and urged Jeremy Hunt, the Chancellor, to step in with stronger measures to rein in financial institutions.
Rules are ‘Kafkaesque’
David Davis, a former Cabinet minister, said ministers should ditch the “Kafkaesque” rules altogether and it was “laughable” that children of Peers were being targeted.
“Unless you’re insolvent I don’t think banks should just be able to close your account and if they do there should be an automatic appeal process,” he said.
Anne Marie Morris, a Tory MP and member of the Commons Treasury committee, hit out at the “intrusive checks” which she said struck “the wrong balance”.
“We have to look at the way this is impacting the wider family,” she said. “It’s one thing for an individual who has decided to go into politics to be subject to particular scrutiny.
“But the way this is being assessed seems to go quite broad not only to direct family but even to indirect family.”
