Only one mainstream bank seems willing to consider opening an account for a straightforward trust without significant values or other financial incentives, according to a new report.
Banks are pulling back from trust business and imposing more restrictive eligibility requirements, according to STEP, the professional body for trust and estate practitioners.
Trustees are also experiencing existing accounts being closed, sometimes with little notice or explanation, according to STEP.
Banks generally have considerable discretion over whether to begin or continue customer relationships, meaning trustees may have limited practical remedies once a decision to close an account has been made.
The problem is affecting legitimate trusts seeking access to ordinary banking services, according to the report out this week.
STEP says the problem is being driven not by trusts being legally unsuitable for banking but by the compliance burden associated with them.
Banks must identify and verify trustees as well as understand the wider structure of ownership, benefit and control, potentially including settlors, beneficiaries, protectors and others exercising control. This can make trust onboarding considerably more complex than other clients.
Emily Deane TEP, technical counsel and head of government affairs at STEP, said: “Trusts are legitimate and widely used legal arrangements, yet trustees are increasingly struggling to access the banking services they need simply to administer them.
“Banks have an important responsibility to prevent financial crime and nobody is arguing that those safeguards should be weakened. But legitimate customers should be assessed on the risks they actually present rather than being excluded because they fall into a particular category.”
STEP has published its new Trust Banking Due-Diligence Toolkit to help trustees anticipate the information banks are likely to require and present it in a structured, consistent and readily verifiable form.
It is designed for use when opening an account and throughout the banking relationship, including periodic reviews and situations where an account may need to be transferred or replaced.
STEP is the global professional association for practitioners who specialise in family wealth and succession planning, with more than 23,000 members in 120 countries.
The Toolkit covers trust structures and beneficial ownership; customer due diligence; source of wealth and funds; expected account activity; changes in beneficiaries, trustees and other relevant parties; ongoing monitoring; and contingency planning if a bank account is closed.