The City regulator has issued a warning to British banks that refuse to open accounts to sex workers after hearing that restricting access to business banking services could cause “significant harm” to individuals.
The Financial Conduct Authority (FCA) said that while banks could in theory offer accounts to the adult entertainment industry, in practice they often refused or closed business accounts.
Lenders often close accounts for financial crime and reputational reasons, watchdogs say. Sex work is legal in Britain, but paying for sex is illegal in Northern Ireland.
A recent FCA roundtable revealed serious concerns about the lack of access to financial services for individuals across the adult entertainment industry, which includes stripping, pornography, escorting, dominatrix and “full sexual services”, commonly known as prostitution.
“As representatives of the adult entertainment industry explained to us, the refusal or termination of these accounts could result in significant harm to the individuals running these businesses, particularly if they have to rely on cash or personal bank accounts to do their work, the latter of which could mean revealing their names to customers and therefore putting them at risk of blackmail,” the FCA said in a statement. Report It was released on Wednesday.
Regulators have also heard of the closure of accounts belonging to family members of sex workers, who have long complained they are treated unfairly by lenders.
Some financial institutions told the FCA they were finding it difficult to balance financial crime regulation with financial inclusion, but said such regulations might need to be “recalibrated” to reduce the risk of “inadvertently excluding consumers in the adult entertainment industry” who met the account opening criteria.
The FCA is now requiring lenders to publish a “clear and properly considered definition of reputational risk” to govern decisions about account closures.
Dr Raven Bowen, chief executive of National Ugly Mags, which provides support to sex workers, said she welcomed the regulator's intervention.
It is the first time that the FCA has given such detailed guidance on how banks should treat the adult entertainment industry. UK Finance, the banking and financial services industry trade body, has previously said it has not given guidance to its members on the issue and that each bank will take a view based on its own commercial and risk tolerance.
“We recognise that there are significant challenges to accessing banking in some sectors,” a UKFinance spokesman said. “We continue to work with regulators, members and relevant industry bodies to improve access to banking.”
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“Accounts are closed or applications rejected only after thorough screening and investigation. The main reason this is done is to address financial crime concerns and banks must follow strict regulations in this area.”
Banking the proceeds of sex work is not a crime and does not amount to money laundering under UK law, but the scope is narrow given that many related activities are illegal, including soliciting in public places, running brothels, pimping and street prostitution.
There is no agency to regulate sex workers or the pornography and adult entertainment industries, which means it can be harder for private businesses like banks to assess potential clients because there are no officials to certify that work is being done within the rules.
