During a Senate inquiry into “Australia as a Technology and Finance Centre” representatives from three fintech firms criticised Australian banks for their ‘de-banking’ practices, which tend to hit those involved in the crypto sector particularly hard.
‘De-banking’ refers to financial institutions withdrawing their banking services from a business. This may be done for compliance based reasons such as counter-terrorism financing or AML regulations, but those who experience de-banking often witness the process without explanation.
Aus Merchant, Bitcoin Babe and Nium addressed the Committee about their independent experiences of de-banking, with Nium’s Asia-Pacific head of the consumer business, Michael Miassian noting that anti-competitive behaviour by the banks was a common theme.
“It is within the bank’s terms and conditions, (they can) cease offering services at their will. So to that end, there’s no real opportunity to appeal the decision and to gain any further clarity as to why you’d be denied.”
“The reasons that are given by the banks are very opaque,” Minassian added.
Minassian also said that while the Singaporean unicorn Nium operates in over 40 countries, it is has only been de-banked in the Australian market.
Bitcoin Babe’s Michaela Juric told the Committee that she has been refused service by 91 banks, put on a terrorist watchlist and has been ‘buillied’ by financial watchdog Austrac. In addition to the de-banking of her business, Juric explained that the personal accounts of herself and close friends or family had also been de-banked.
The three firms who addressed the Committee are registered as reporting entities with Austrac, which demands that they must provide SARs (suspicious activity reports) if they believe their businesses may be used for illegal activities. Yet, CEO of Fintech Australia, Rebecca Schot-Guppy, stated that this level of compliance is still not recognised by highly risk-averse banks.
Schot-Guppy told the Select Committee: “I’ve got at least 40 anecdotal issues, but I’d say that there’s at least 150 of them that have been de-banked over time.”
“I would say at least 100 of them are fintech businesses, given that the highest amount of de-banking occurs probably in that payments space…but this is also an issue for our wealth tech businesses. And its not the wealth techs necessarily being de-banked themselves, it’s their customers, the likes of trading platforms, robo-advisors.”
A low-appetite for risk by the large Australian banks (the Big Four) is unsurprising, given relatively recent AML/CTF scandals and subsequent record fines CBA and Westpac have been ordered to pay.
In a submission to the inquiry in July, Westpac explained that over the course of 12 months to 31 May 2021, it had de-banked eight fintech businesses over that period.