How Barclays is washing its hands of churches and charities

A village hall, a GP surgery, a church, donors to a children’s hospice and a lawyer fundraising for Ukraine. Those are just a handful of businesses whose accounts Barclays has seen fit to close or threaten to close – often providing little or no reason why.

Some are registered charities, providing vital services free of charge to their local communities. Many have held accounts with the bank for a decade or more.

That was until it sent each of them letters, emails and text messages, either informing them their accounts would be shut, or that they had just a few days’ notice to provide financial information before they risked losing their banking facilities. In many cases, even after submitting the required details, their accounts were closed down.

“We kept giving Barclays the information they wanted and they said they hadn’t got it,” claims Clive Townsend, who collects donations for Martin House Children’s Hospice in Scarborough.

The group of six pensioners who fundraise for Martin House Children’s Hospice, a charity in Boston Spa, Wetherby, was hit with restrictions on its Barclays account after the bank asked for 25 pieces of information in a two-month period.

After receiving the request in November 2022, he claims he responded straight away and provided the necessary information, but in December was contacted again asking for the same information. He said he was told by the bank that it did not have his first response.

The next month, in January 2023, he went into his local branch of Barclays to make a complaint and in March the account was suspended, with just 10 working days’ notice given until it was shut for Mr Townsend to supply information he believed was already with the bank.

Mr Townsend is just one of several innocent businesses who believe Barlays intentionally tried to force them out. Some experts claim it’s linked to the cost of operating charity accounts – which are often empty.

“We’re just six elderly people who raise money,” he said, adding that the “unnecessary hassle” the bank put him through was almost as though it “didn’t want the account”.

Barclays upheld his complaint in April and credited £25 as an apology. But in October, the charity received the same letter and the process began all over again. Barclays said it would work with him to “resolve any outstanding matters”.

The fundraising group, Scarborough Friends of Martin House, was unable to order a new cheque book for donations after Barclays restricted its account. After being contacted by The Telegraph, the bank agreed to issue one.

While banks will often ask customers to keep their accounts as up to date as possible, Barclays has been accused of taking an overly heavy handed approach.

“It felt like I was guilty until proven innocent,” said Leon Wheeler, an 80-year-old retiree and treasurer of his local village hall in Church Preen, Shropshire.

Mr Wheeler claims that the letter appeared out of the blue after 18 years of banking with Barclays, threatening to close the village hall’s account.

Nothing out of the ordinary had happened to explain the letter, he said, and the village hall had seldom turned over more than £3,000 a year in almost two decades with the bank.

Multiple phone calls to the bank failed to reveal the exact reason as to why the hall’s accounts had been flagged.

It was only after hours spent going through financial records that he discovered a deceased trustee was still listed on the hall’s registration with the Charity Commission.

Once Mr Wheeler removed the name, Barclays stopped chasing him, but never assured him the issue was “dead and buried”, he said.

“The threatening tone of the messages was disturbing: it was all to do with money laundering. It seemed to be a sledgehammer to crack a little nut, in our case. It’s a charity and people don’t get paid to do this.”

After being contacted by The Telegraph, Barclays agreed to send a letter to Mr Wheeler confirming he had fulfilled all requirements and that the matter had been resolved last June.

More complaints than any other bank

The cases come after Barclays was revealed by The Telegraph to have shut the account of a GP practice in Royston, Hertfordshire, and that of a Methodist church in Bradford last year.

Barclays also recently debanked a lawyer fundraising for Ukraine, closing 11 of his business accounts – including that of his charitable foundation he used to fund medics on the frontline.

Sector-wide data from regulatory body the Charity Commission recently revealed that 42pc of charity trustees, many of which use business bank accounts, reported issues with their banking ranging from difficulties understanding the requirements banks make of them to challenges complying with checks of their identity.

The Telegraph has also received over a dozen letters from readers about Barclays, many complaining of account closures, bad customer service and the shutting of local branches.

The lender has long been one of Britain’s most complained-about banks. In the first half of 2023, people made 5,519 complaints to the Financial Ombudsman Service (FOS) about Barclays, more than HSBC, Lloyds, NatWest and Santander which each received 3,199 to 3,994.

But it is far from a one-off. Barclays has been the subject of more ombudsman complaints than any of its major rivals in every six-month period since 2019, according to FOS figures, many of them about customer service, branch closures and bungled ISAs.

The lender is also at the bottom of the pack for customer service ranking for business accounts, according to research conducted throughout 2023 by BVA BDRC, a market research firm.

‘Easier and cheaper to simply move people on’

Banks face fines from the City watchdog if they are found to fall short of legal requirements to keep financial details of customers up to date and investigate any irregularities in accounts. But doing this costs banks a significant amount of money.

A study by LexisNexis, a data firm, recently found that compliance costs for the British financial services sector rose to £34.2bn in 2022, up by a fifth in just two years, equating to an average of £265m per retail bank in the UK.

“One of the drivers is cost, coupled with the potential for significant financial penalties for getting things wrong,” a senior executive at UK Finance, the industry group that represents banks, recently told MPs.

The report, published by an all-party parliamentary group on Fair Business Banking, stated: “In deciding whether continuing with or entering into a customer relationship meets the risk appetite of a bank or goes beyond it, it will be impossible to completely separate financial crime considerations from commercial ones.”

The report concluded that it appeared the “enormous operational costs of compliance with money laundering checks, set against the financial jeopardy of getting it wrong meant it was sometimes easier, and cheaper, to simply move people on.”

The financial penalties can be sky high for banks. In 2022, Santander was fined over £107m by the Financial Conduct Authority after the watchdog found “serious” and “persistent” gaps in its anti-money laundering policies.

The report, which looked at a number of major banks, showed how many, including Barclays, have come under scrutiny for their approach to dealing with the risk posed by customers, whether to do with financial crime or the wider reputation of the bank.

The decision by Barclays and other high street banks to close the accounts of all expat customers serves as another example of how firms respond in the face of rising costs. Barclays told its customers it would be prepared to retain them if they switched accounts to one that requires a minimum current account balance of £100,000 or a monthly charge of £40.

Separate research conducted by the Treasury select committee showed that more than 140,000 small and medium-sized businesses had their accounts closed by high street banks last year, following an investigation by MPs.

Harriett Baldwin, Treasury select committee chair, said “What we’ve learned over the course of our inquiry into financing for small and medium sized businesses is that these cases are eye-poppingly frequent.

“Unfortunately, cases of this kind no longer surprise us on the Treasury Committee. We’ve received evidence that business bank accounts are often closed with little or no notice, rendering firms completely financially incapacitated.”

‘Widespread problems in the way banks engage with charities’

Paul Latham, director of communications and policy at the Charity Commission, said: “There are widespread problems in the way banks engage with their charity customers and we continue to hear from charities dealing with the fallout of these issues.

“Charities provide vital support to people across the country and urgently need to receive better service from their banks. This is why we continue to press this matter and engage with high-street banks, UK Finance and the Financial Conduct Authority.” End

A spokesman for UK Finance, the industry body for banks, said: “The banking sector is proud to support large numbers of charities. We understand the impact account closures can have and therefore any decision to close an account is never taken lightly and is done in line with legal and regulatory obligations.

“We have been working closely with [a] wide range of community and charity organisations to understand the issues and challenges they are experiencing.

UK Finance added that it will shortly be publishing detailed guidance to help charities get the best out of the financial services sector.

Barclays said 65pc of complaints to the ombudsman were upheld in its favour.

A Barclays spokesman said: “Barclays serves thousands of small businesses across the UK and we recognise their importance to the success of the economy. It’s essential we fully understand our clients’ businesses so that we can offer tailored advice and practical solutions to help them to succeed. In knowing our customers we can meet our regulatory obligations and our ongoing responsibility to help prevent financial crime.

“In order to meet these regulatory requirements we have to request certain information from our customers. We fully understand that providing this information can be time consuming and we work hard to make what can be a complex process as smooth as possible. In requesting the information we need, we communicate with our customers through a variety of channels – by post, alert banners on customers’ online and mobile banking, e-mail and SMS.

“It’s essential our records relating to account owners and authorised officials who instruct the bank and transact on the account are up to date. In the main, business clients are more used to updating the type of information we require and so the required detail is often more readily available.

“However charities, associations and clubs are often run by volunteers in their spare time and can find this administrative task more burdensome. With this in mind, we are fully supporting these customers, offering additional support with the changes needed so that their accounts remain compliant.”