Are the 8,000 or so Jersey-based accounts frozen by Lloyds fonts of dirty cash?
The bank has been trying for three years to get their holders, largely longstanding customers whose details require checking, to prove their identity in compliance with international standards.
Having made multiple failed attempts to contact them since January 2016 it has now pressed the button. Their accounts will be in the deep freeze until such time as the documents required to confirm their identities are submitted.
Lloyds’ move comes against a backdrop of tighter “know your customer” rules that banks across the world are grappling with. Others have been similarly rattling their customers’ cages and it would be no surprise to see similar stories to this one emerging over the coming months.
The answer to the first question is, in all likelihood, no. In the vast majority of cases the money will be from legitimate sources and held in one of Lloyds’ Jersey accounts for legitimate reasons, such as the holder working abroad.
But the hoops banks are having to jump through to establish and confirm their customers’ identities and source of funds are becoming greater, and the measures they are having to take to tick the regulatory boxes required of them more onerous, as watchdogs seek to put the squeeze on international money laundering and tax evasion.
What really makes this story interesting, however, is how it comes just a week or so after Facebook announced the launch of libra, its new cryptocurrency, into the world.
The big selling point with libra is that it will be a means through which the teeming masses of unbanked will be able to access the digital economy. Got a phone? Get Facebook and you’re good to go.
It’s a new form of money, that will, unlike bitcoin, have a stable valuation through being linked to a basket of international currencies, which will make it far more useful as a means of buying goods and services and a handy, and cheap, means of transferring funds from person to person.
So, question: does this mean you’re going to have to submit a passport, a utility or council tax bill, a driving licence and so on, before signing up to Facebook? Most of the unbanked don’t have those. Lacking such documents is often why they are unbanked, in both the developing but also the developed world. So it would rather defeat the object.
Much of the commentary around libra has centred on fears that it will be a means through which Facebook will be able to mine even more data from customers, and to spy even more effectively on them.
How long, critics have asked, before your promised ability to opt out of letting Facebook spy on your libra transactions, made via the company’s Calibra digital wallet, becomes compromised? How long before you’re basically in the position of having to consent to be able to effectively use the thing?
In theory Facebook already “knows” us, its customers, to a deeply disturbing degree.
But what if Facebook and libra user Jerri Smith is not really Jerri Smith? Was if she’s a fiction, a ghost in the machine, set up for the purposes of getting around the regulations that prevent the person behind her using the conventional banking system to wash dirty cash.
Is Facebook, or the controlling Libra Foundation, going to write the sort of letters Lloyds has been sending out for the past three years? Will it DM Jerri instead? What’s it going to do if it doesn’t get a satisfactory answer from her?
Libra has promised to let the world’s financial regulators come in and look around. But the Libra Foundation (pay $10m and you’re in) is notably headquartered in a country whose banking secrecy laws have allowed all sorts of questionable conduct.
The more one looks at its implications, the more questions are raised. This story serves to highlight another one. Chris Hughes, a co-founder of Facebook, last week warned that libra could give tech firms excess power. Excess power with a frightening lack of the sort of hard won accountability that banks have to accept.
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