Bank account providers must review their overall approach to charity account closures and denials to ensure vulnerable users don’t miss out, the Financial Conduct Authority has said.

Almost half of the charities surveyed by the Charity Commission said they have experienced banking issues in the past year.

The FCA last week published updated findings on its 2023 report, UK Payment Accounts: access and closures, which examined concerns that accounts may have been closed because of the account holder’s political beliefs or lawfully expressed views. 

The FCA’s initial report did not see evidence of political beliefs or other views lawfully expressed being used as a rationale for charity account denial, suspension or termination.

But its updated report, published on 4 September, found charities were struggling to meet due diligence requirements because of information requests being difficult to comply with or difficult to understand.

“This was a common issue highlighted by charities when seeking to obtain or retain their account,” the report said.

“Many of the charity and non-profit organisations’ representatives we spoke to reported difficulties in obtaining and maintaining a payment account.

“They reported difficulties meeting the requirements that firms put in place to satisfy their financial crime-related obligations, including responding to information requests as part of due diligence requirements, and mapping their organisational roles (such as treasurers) onto account application journeys.”

The FCA said it heard multiple times from charities that firms required that all signatories to an account be present in branch when changing signatories, and that the process of opening accounts could sometimes map across poorly to charities’ organisational structures.

It said: “However, we also heard examples of charities having complex governance structures that made carrying out due diligence difficult for firms, such as a charity having more than 100 trustees.

“These issues are well known and there has been engagement between UK Finance and representatives of the charitable sector to attempt to help address some of these issues.” 

The FCA also flagged that charities representing vulnerable people experienced particular challenges in obtaining and maintaining accounts. 

These included individuals with learning disabilities being denied an account because the firm assumed that they needed a power of attorney, while others were denied an account because they could not show a common form of ID, the report said.

The FCA said that firms were poor at making their customers aware of the availability of Basic Bank Accounts: a form of current account that offers similar features to a standard bank account, but without an overdraft or cheque book.

“Charities working with people experiencing homelessness highlighted to us that they have found firms’ promotion of the availability of BBAs to be poor, including when they themselves tried to find out information about them,” the report said.

“We also did not see evidence of BBA providers informing customers about the availability of BBAs when terminating payment accounts for reputational risk reasons, despite firms not being permitted to consider reputational risk when denying a customer a BBA.”

The FCA said it would hold a roundtable with charity representatives and firms to discuss banking issues and potential solutions in the coming months.