en investigates: Is your church bank account at risk of closure?

Last summer the national media shone the spotlight on when and how banks may close customers’ accounts.

Evangelicals Now has been contacted by two evangelical churches in Essex, South Park Chapel, Ilford, and Becontree Church, in Barking and Dagenham, London, whose banking facilities were withdrawn recently by Barclays.

Having supplied en with a detailed timeline of how these closures took place, their spokesman, Jason Freeman, who is a trustee of both churches, claims: ‘It is at least possible that someone in Barclays has an agenda to close down church bank accounts.’

But our subsequent investigation, which included interviewing two senior banking executives – who are also evangelical Christians – has found that the picture is rather more complex, given modern money laundering and other regulatory requirements. The lesson is that churches must never be complacent about their relationship with their bank.

The Essex churches’ problems with Barclays began last March. They told us that for the next eight months they sought on numerous occasions to resolve mandate and ‘Know Your Customer’ (KYC) issues – a standard check all banks have to do on corporate or similar account holders – and confusion as to what type of account they should have. The bank’s communication was also poor, it is claimed, with numerous promises to call back not kept. Finally in November 2023 both churches’ accounts were summarily closed; the proceeds from one have still not been received by the church.

We put this situation to a former senior clearing-bank executive. He said: ‘Banks are subject to detailed and stringent KYC requirements. These have become more onerous over the years as regulators and politicians have wanted to prevent the UK financial system from being used for criminal purposes. The banks all have armies of people operating the KYC checks and the only way to do it at all efficiently is to prescribe the process in detail. That doesn’t allow for discretion in individual cases. Customers unused to these sorts of processes, or why they are needed, will often find them bureaucratic and irritating and may suspect they are being used to “persuade” the customer to move their business elsewhere. But that isn’t usually the case at all.’

But Jason Freeman says: ‘While the bank clearly has a legitimate basis to want to know its customers, it was never made clear to us what information they actually wanted! It seems like at every turn, instead of helping us to resolve whatever problem the KYC team had identified, Barclays created fresh hurdles.’

Paul Houghton, CEO of Christian financial institution Kingdom Bank (see photo above), sees the issue from a different perspective. He told en: ‘Many people will assume that church bank accounts being closed is an anti-Christian attack. But the reality may well be more nuanced. Aspects of typical church banking are becoming increasingly onerous from a regulatory point of view. For example, a church transferring money to an overseas organisation in a country deemed “high risk” for money laundering (such as Albania, Tanzania or Turkey) requires the bank to undertake significant extra checks. Even just one or two such transfers each year may well cost the bank thousands of pounds to administer, making that account a net lossmaker.

‘Furthermore, if the checks raise any suspicious money-laundering red flags, the bank must file a Suspicious Activity Report with the National Crime Agency. Then it may well be within its rights to cease its banking services for the church, but at the same time it is legally bound not to “tip-off” a customer that it has made a regulatory report, so the church would be left in the dark and without a bank account.

‘The critical learning point is that church treasurers should speak to their bank up front about any proposed overseas transactions. Simply pressing on because it has always worked in the past could be putting your account at risk.’

Asked what churches need to do to keep their accounts open, the senior bank executive quoted above says they must, firstly, recognise that smaller non-Anglican churches (especially), which are often set up as separate charities, may be viewed as a challenge by their bank. They must start by ensuring that their annual accounts and details of their trustees are fully up to date on the Charity Commission website.

Secondly, these difficulties are compounded if the church was set up long ago as some sort of unincorporated association. Old chapels, for example, often were, and that type of structure makes it even harder for their bank to understand who exactly bears the legal responsibility for it. One solution would be to convert into a Charitable Incorporated Organisation (CIO), or a company limited by guarantee.

As en went to press, Barclays paid £350 compensation to the two churches.

Barclays were approached for a comment more than a week before going to print, but did not respond.

• After this report was written, The Guardian reported in December: ‘Some charities, churches and other community groups have described being thrown into financial disarray after Barclays shut or froze their bank accounts without warning.

‘Several of the organisations affected, which include charities helping young people, and a Methodist church in the midst of significant building works, have banked with Barclays for over 20 years.’

A Barclays spokesman was quoted as saying: ‘We take the protection of our customers’ funds and data extremely seriously. As part of our ongoing responsibility to help prevent financial crime and to meet our regulatory responsibilities, we are required to ensure we hold up-to-date information regarding our customers’ accounts. Customers are also required to inform the bank in a timely manner of any change to their legal status relating to their business, charity or trust.’ en staff