Hundreds of thousands of innocent people and businesses are losing access to basic banking services due to overzealous anti-money laundering regulations in the UK. In this Explainer episode, Jamie Whyte, IEA Senior Research Fellow and author of the new IEA publication "Debanked: The economic and social consequences of anti-money laundering regulation", exposes the staggering scale of this problem.
In 2022 alone, banks closed over 343,000 accounts, with money laundering risk cited as the reason in about half of those cases. Yet fewer than 2,000 people were actually convicted of money laundering offenses that year. The compliance costs of these stringent "Know Your Customer" rules now total £34 billion annually for UK banks - double the entire budget for policing nationwide.
Despite such excessive costs, there is little evidence the regulations are effectively combating criminal enterprises like the illegal drug trade, which has in fact grown 60% since global anti-money laundering rules began in 1990. As Whyte explains, the unintended consequences are banks shutting down accounts en masse, harming innocent customers, in order to avoid billions in potential fines from regulators like the FCA.
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