At hearings before the Australian Senate Committee on September 8, several domestic crypto-related businesses shared their experience of financial institutions denying or terminating banking services without notice, or offering up any reason for doing so.
‘Debanking’ is a relatively new phenomenon that is not well known among the broader population. Quite simply, it’s the process whereby financial institutions, usually retail banks, decide for whatever reason to terminate services to a particular customer.
As Australia moves towards becoming a cashless society, the negative consequences for those debanked is self-evident.
Banks tend to be risk-averse and often claim they are merely complying with their statutory anti-money laundering (AML) and counter-terrorism financing (CTF) obligations. In Australia, under the Anti-Money Laundering and Counter-Terrorism Financing Act, 2006, failing to do so carries a maximum penalty of up to A$22.5 million per breach.
Transparency and Communication Lacking
The common denominator underlying many of the complaints was a lack of transparency and communication.
Rebecca Schot-Guppy, CEO of Fintech Australia, told the Senate Committee that around 150 of her organisation’s members were debanked without reason or the ability to appeal. A local remittance business, Nium, described its position:
Nium has bank relationships in 40 countries around the world and yet Australia is the only market where we’ve been debanked.Michael Minassian, VP, regional head of consumer business, Australia & Oceania, Nium
Bitcoin Babe founder Michaela Juric told the committee her banking services had been terminated 91 times since founding her crypto brokerage business seven years ago. Remarkably, even some of her family members were affected, making it difficult to access everyday utilities such as internet, electricity, water and insurance.
Local brokerage Aus Merchant was debanked four times over the past year, leading managing director Mitchell Travers to conclude that anti-competitive practices might indeed have been the real reason for the banks’ actions.
With the sort of anti-competitive nature of the banks, it’s somewhat buying them time…It could be considered a stopgap for them as they sort of educate and find a way to enter the space in a more profound manner.Mitchell Travers, managing director, Aus Merchant
Senator Andrew Bragg, chair of the Senate Committee, acknowledged the issues raised but was quick to distinguish debanking within crypto from the remittance industry in general.
There are a range of reasons, including a lack of regulation, driving debanking in crypto, which is something this committee can help solve. In relation to remittance, I suspect there are anti-competitive drivers behind that, as banks have had a monopoly on ripping people off for remittances forever. Both of these issues are solvable, but they will require different tools.Senator Andrew Bragg, Senate Committee chair
Hearings continue in the hope of gaining further insight into this matter. On the plus side, it appears as if the Senate Committee is committed to providing clarity on how crypto and other fintech businesses can work with traditional financial institutions going forward.
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