We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Dear bank “customer”, you actually think it is your money?

A colleague of mine sent me this item, from the BBC:

Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it, the BBC has learnt. Listeners have told Radio 4’s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000. HSBC admitted it has not informed customers of the change in policy, which was implemented in November. The bank says it has now changed its guidance to staff.

How jolly decent of them.

Mr Cotton cannot understand HSBC’s attitude: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

Well, he now knows differently. A person with a bank account does not own the cash contained by the bank and has total control over it. (I am not aware of any line in my bank contract saying as such.) A deposit is a credit to the bank, and under modern banking laws, with the system as it operates, a bank is not obliged to instantly hand that over, no questions asked. (Under fractional reserve banking, the only kind of guarantee is by deposit protection, but that is usually only up to a certain limit.) In a full free market of course, people could make whatever kind of agreements with banks that they wanted, even consenting in some cases, perhaps, to having to give information to a banker to prevent fraud. However, government regulations in the UK (and certain other nations) being what they are (such as controls to stop money laundering and tax dodging), banks are increasingly operating as proxies for government agencies.

According to HSBC, the issue is to combat financial crime. Maybe that is true but this is not the whole picture:

HSBC has said that following customer feedback, it was changing its policy: “We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for.”

“The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime. However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologise to any customer who has been given incorrect information and inconvenienced.”

One of the ironies of the situation is that HSBC last year was hit by a massive fine for anti-money laundering offences (stuff to do with Iranian sanctions and drugs); hitting long-standing clients with this sort of intrusive crap will not do much for that bank’s brand reputation. It is right to stop fraudsters taking money out of accounts of clients, but perhaps the bank should be more frank with clients on why it makes these kind of demands and what is driving this situation. To a considerable extent, banks are no longer really part of any free market, capitalist system.

45 comments to Dear bank “customer”, you actually think it is your money?

  • I bank with Credit Suisse in Geneva, and I can transfer huge sums of money in one go online without a peep out of them. I partly think the scare stories going around Europe about dodgy Swiss banks is less to do with tax evasion than worries that if the average punter realised how much better the Swiss are at doing ordinary banking, they’d either start shifting their accounts or asking awkward questions to the likes of HSBC.

  • lucklucky

    Well lets see if those costumers take the money out of the HSBC. If not they will have what they deserve.

  • Johnnydub

    As a happy HSBC customer I think a little correction is in order.

    HSBC weren’t fined for facilitating money laundering, they were fined for not keeping sufficient paperwork to prove that they hadn’t. I suspect this is another government bureaucracy instruction…

  • CaptDMO

    Because we are not allowed to return the entrusted principal we “invest” for you, without a paper trail that’s available for whoever MAY have access to it’s providence.
    By the way, there’s new fees for “managing” your assets, and the “interest’ rate has been lowered AGAIN.
    Didn’t you READ the ACTUAL “terms of service” contract?

  • thefrollickingmole

    Single word answer, “Crack” or “cocaine” and lets see where the chips fall then.

  • Deep Lurker

    HSBC weren’t fined for facilitating money laundering, they were fined for not keeping sufficient paperwork to prove that they hadn’t.

    This is a wide-spread cancer: For a large and growing number of activities one is required to keep paperwork proving that one hasn’t committed any crimes. Mere factual innocence with regard to the underlying act is no longer a defense.

  • Dave Walker

    I’m amazed that cash hasn’t been phased out yet.

  • bloke in spain

    Had this with Barclays once over £7k.
    “Don’t be stupid, that’s pocket money. Really? Fair enough. OK, transfer my current a/c balance to this bank to a/c number xxx & close it.”
    Phone conversation to someone.
    “How would you like your money, sir?”

    Apparently there are rules & rules.

  • Paul Marks

    Good post.

    As for transferring money electronically – it (the cash) is not actually transferred till one has the money in one’s hand (till then it is just a PROMISE – nothing more).

    It is like the people who are still complaining about the stealing of money from their bank accounts in Cyprus – they still do not grasp that the money was not in the accounts in the first place.

    All they had were promises – and lights on a computer screen.

    Cash is no longer gold and silver – it is government notes and coins.

    However, banks have little actual money (cash) in relation to the “money” they claim to have (which is mostly a credit bubble illusion.

    As late as 1930 the biggest British Bank – Midland Bank (now HSBC) had about one Pound in cash for every five Pounds of money it claimed to have.

    I doubt that it is one Pound in cash for every 100 Pounds they claim to have now.

    And the cash is no longer gold – or even notes that have a claim to gold.

    It is a system of (about) 1% paper (non convertible paper) and 99% magic pixie dust in an invisible fairy castle suspended in the air by Moonbeams.

    Paul Johnson (in “Modern Times” – drawing on Rothbard, but with crazy bits removed) rightly says that the situation in 1930 was NOT gold-as-money it was a “not in front of the children” gold-standard with massive credit expansion by the Federal Reserve and Bank of England (creating the credit bubble of the late 1920s).

    But the fact remains that the Midland Bank of that time was vastly closer to sanity than the HSBC (or any of the banks – including the big Swiss ones) of today.

  • Tom

    Your analysis is spot on. Bear in mind it’s not just the bankers. Your accountants and lawyers are legally obliged secretly to inform the police of any suspicions they have as to the source of your funds. If it turns out that the funds are the proceeds of crime and they didn’t denounce you, then they are themselves guilty of a crime. It’s also a crime to tip you off that such a report has been made and they may find themselves ordered to lie to you as to why your transaction is delayed while the police check you out.

    One reason I gave up my practising certificate as a lawyer when I returned to the UK after 20 years abroad is that I was not prepared to be a secret policeman. I went into the law to help my clients, not snitch on them. Nor is this rare. I was on the management committee of my former law firm in the year before I retired from practising and I know exactly how many secret denunciations my partners made. I was horrified.

  • Johnathan Pearce

    Jonnydub: HSBC was fined for multiple offences of not having AML controls in place, which, given the markets it operates in, meant there was a serious risk that dubious stuff went on. HSBC has closed down certain operations. There have rumours for years that bad stuff was happening at that bank. The bank says that a lot has been done since.

  • Mr Ed

    David, absolutely, but if one bank loses the confidence of depositors before others, it is in trouble, if we lose confidence in all banks, we are in trouble for a while, until a new dawn of 100% reserve warehousing is available, at a price but at less cost.

  • Fraser Orr

    Me: “I’d like to withdraw a large amount of money from my account — in fact all of it…”
    Bank: “Sir, I need you to explain why you are withdrawing such a large amount. You need to give a reason.”
    Me: “Simple enough: my reason is that I hate your dreadful new policy.”

    You can change your bank whenever you want, you can barely do anything to change your government.

    I’m thinking that a great new business would be manufacturing mattresses with lockboxes build into the underside….

  • AndrewWS

    HSBC operates in Switzerland. I wonder if they try the same there.

  • bloke in spain

    @ Paul
    I don’t understand your hangup about how much paper a bank carries. Cash is a minute fraction of banking activity. One would hope they had as little as possible. Enough to cover expected levels of withdrawals. It’s not actually worth anything. If it’s not reused for withdrawals it goes back to the BoE for disposal.
    “not actually transferred till one has the money in one’s hand (till then it is just a PROMISE – nothing more).” But that’s all the cash money is. A promise.
    It’s all promises, right the way down.

  • Lee Moore

    What I dislike most about HSBC’s behaviour is the weaseling. I understand that they are afflicted by lots of government regulations, many in the form of “prove you’re innocent” requiring the creation of policies and document trails to protect themselves from government kneecapping. But this is seriously Clintonian misdirection :

    “The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime.”

    They hope you will believe that the first half of the sentence is connected to the second half – ie they are concerned about financial crime AGAINST you, their customer. But in fact they are concerned about financial crime BY you, their customer. They don’t want you to have cash if you’re going to use it for drug dealing, terrorist activity, or, worst of all by far, tax evasion. Because the government will then blame them.

    So why don’t they say “The government requires us to keep a check on movements of cash, because they suspect you of money laundering and/or tax evasion. We do not suspect you, we love you. You are our valued customer, and you pay our wages. Why wouldn’t we love you ? But we are required to act as the government’s agent in this. Sorry for the inconvenience.”

    Banking is supposed to be about trust, isn’t it ? So why throw out gratuitous dissimulations ? If they were lawyers and actually being paid to dissimulate, it would make sense. But they aren’t even being paid for it. So why do they do it ?

  • Bruce

    “So why do they do it?”


    Let’s imagine the entirely unlikely event of a bank telling the “regulators” to XXXX off.

    About two milliseconds after that, a team of auditors and “official” hackers would descend on said bank in droves.

    They would then proceed to disrupt the bank’s business until the bank “surrendered” or, preferably, collapsed, thus giving the “regulators” an even bigger win and sending a “message” to any other potential “recalcitrants”.

    This process, and its parallels in other fields of “law” are often referred to by the “agencies” as “attitude adjustment”.

  • They all do it, Lee, from my experience – not that it makes it any better, just saying. I think that the reason is that at least the people who actually write this crap (lawyers? PR people?) do believe it themselves. I doubt actual bankers write these texts or think this way.

    Bruce, you may have missed Lee’s point: it was not about telling the government to XXXX off, but about telling the customers the truth, while still complying with the demands of the government.

  • Paul Marks

    Bloke in Spain.

    You are mistaken – cash is not a promise.

    It was in this country till 1931 (the promise was gold), but then the promise was dishonoured (although the words were left on the notes).

    Cash is the notes and coins of the government – it has value because of legal tender laws and tax demands (as Paul Krugman put it, in a rare moment of honesty, because of “men with guns”). There is no promise of any real commodity (unless you count the lead bullets in the firearms).

    Banks do not “carry” little cash – they HAVE little cash.

    The vast majority of bank lending is NOT from real savings. Even in the days of the original J.P. Morgan (a century ago) he lent out about 30 Dollars for every 10 Dollars in real savings (that is not a “fraction” – unless one considers 30 tenths as a “fraction”) he did this via complex interactions with other banks (basically book keeping tricks – treating as “deposits” what were not deposits at all and talking of “crediting to the account” rather than physically lending out money).

    Today it is not 30 Dollars (or Pounds) in loans for every 10 Dollars of REAL SAVINGS (cash money real savings) it more like a 100 Dollars of loans for every ONE Dollar of real savings. And it is naught to do with “carrying cash” – the cash DOES NOT EXIST. There is no real connection between real saving and borrowing at all – no more “cheating at the margin” (as with Mr Morgan) now it is just insanity, rationality is dead.

    As for the “broad money” the banks say they have (and lend out) – it is sweet “Fanny Adams”.

    Still happy platinum mine strike everyone. South Africa is going down the tubes (whether the strikes are settled or not) – but there were go.

    And Happy Chinese New Year on Friday. When the Chinese come back after their holiday we shall see …… (who knows – I do not not).

    It is a special day today – but best not to mention it, as (if attention is drawn to it) is usually marked in utterly vile ways in Britain (anti-Semitic cartoons, offensive [and rabidly dishonest] comments from Members of Parliament and so on).

  • SC

    “A person with a bank account does not own the cash contained by the bank and has total control over it” — should this be “A person with a bank account does not own the cash contained by the bank and the bank has total control over it”?

    I stropped using HSBC because they seemed to make everything as difficult as they could. To take a small but annoying example — with Natwest you can withdraw cash at the counter just by using your card. At HSBC you still had to fill in stupid withdrawal form.

  • Lee Moore

    SC :

    I stropped using HSBC because they seemed to make everything as difficult as they could.

    If this is deliberate, it’s very clever. If it’s just a typo it’s a splendid one. It describes perfectly what happens when one of these vast bureaucratic empires finally manages to piss you off enough to take your custom elsewhere. OK, you have to move to an identical vast bureaucratic empire that will treat you just the same, and OK it will cost you several hours of reward free paperwork, and OK they will not even notice losing one ten millionth of their customer base, but you do get a completely irrational feeling of having shown them who’s boss.

  • SC

    It was a (perhaps unconsciously-caused?) typo.

    Unfortunately I didn’t really manage to show them who’s boss, because I didn’t actually close my account. I already had a few accounts with various banks (from the days when it was easier to open them), and I just started using another. Opening up a bank account is such a painful process these days that I never shut any down, in case you ever need to use another one in the future and don’t want to have to spend hours filling out forms.

  • bloke in spain

    A banknote is a promissory note. UK ones say so, just above the signature (if I remember rightly)

  • Rob

    Made you fill in a form, eh?

    Lloyds allowed a complete stranger to empty my savings account of a five figure sum. Then as an encore they closed my business account and sent the contents to the Government, just on the basis of a fuck up by Companies House. No phone call to check or inform, just did it. Utter cunts.

  • PaulM

    Being refused money by “your” bank is irritating enough, just wait until the first bail-in occurs in the British Isles.
    Most western nations have introduced this iniquitious legislation, including Switzerland.
    I have spent the last 18 months getting out of the system, the only funds I have in a bank at any one time is enough for around four months general expenditure.
    The banks are likely bankrupt and the corruption in finance is endemic.
    Big change is needed to restore some confidence.
    E@OE (Errors and omissions expected 🙂

  • llamas

    And the joke is that terrorists and drug dealers seldom if ever use the ‘formal’ banking system. All this AML nonsense is just a smokescreen for the real purpose of these regulations, which is to try and capture tax-avoiders and tax-evaders.

    Middle-Eastern terrorists don’t bank with HSBC, they bank with the hawala at the hookah lounge on Michigan Avenue – and he doesn’t keep any records at all. Drug dealers bank with the First National Bank of Samsonite.

    Just look at the record – every individual who has fallen foul of these AML regulations has in fact been a small businessman who the Feds suspect of tax avoidance or tax evasion. When any deposit by anybody into any account can be characterized by the Feds as ‘structuring’ (trying to distribute deposits so as to fall below the reporting threshold), it simply gives them a tool to go after anybody they like. Anybody at all. It’s a crooked politician’s dream – you can drive anybody you like into bankruptcy and confiscate all their money – and I’m frankly surprised that more use hasn’t been made of it for those purposes. Meanwhile, the bombers and drug lords continue their activities entirely unimpeded.



  • John B

    @ Paul Marks.

    Cash has value because of tax and it is legal tender?

    Cash, or indeed any form of money has no intrinsic value, it’s value is variable and entirely dependent on the value of that for which it can be exchanged.

    In Zimbabwe of the early 80s there were hardly any millionaires, now nearly everyone is but a loaf of bread costs about half a million.

  • John B

    I wonder about people who have problems with things, like banks, appliances, etc.

    I have been banking with HSBC (Midland) for 40 years without difficulties; my appliances last on average, problem free, for about ten years.

    I wonder if it is more to do with those who have the problems than their alleged cause?

  • bloke in spain

    “And the joke is that terrorists and drug dealers seldom if ever use the ‘formal’ banking system. ”
    You’re in the States, aren’t you?
    I don’t know how it would work your side, but if I wished to send a considerable quantity of money, anywhere in the world, I’d go & see a helpful Pakistani. I give him the money & a similar amount in what ever currency is required is available at a point of collection on production of suitable identification. Usually the combination of a document & identifying code. Tends to be cheaper than the banking system.
    Chinese run similar services. Very reliable & speedy because they rely on repeat custom.
    Really, just a case of knowing who to deal with.

  • llamas

    @ Bloke in Spain – the Pakistani person you describe is known as a ‘hawala’. Being not a million miles from Dearborn, Michigan, and working in the banking systems industry, the existence of such an Informal Value Transfer System is not what you’d call a mystery to me 😉



  • bloke in spain

    Indeed Snr llamas.
    And now even more people know about it. Do you not think that is a tragic undermining of the regular banking system? We should be ashamed of ourselves.

  • Mr Ed

    Just look at the record – every individual who has fallen foul of these AML regulations has in fact been a small businessman who the Feds suspect of tax avoidance or tax evasion.

    And now Bitcoin: As Murray Walker once proclaimed “And look at that!”

  • Would it be profitable in the current environment to open a 100% reserve, warehouse style bank? Promising to not lend out a penny, your money is 100% safe etc.

  • Mr Ed


    The first point would be that people might expect ‘free’ banking, so getting custom for what is in fact a warehouse rather than a bank might be hard, as people might chafe at paying for ‘banking’.

    The second would be that in order to invest money, some willingness to take risks is essential, although pooling risk would be easy, if you wished your bank to risk your money for a return, would there be issues over fractional reserve banks using their practice to offer better rates that might deter investors both investing in setting up the bank and depositing in it? Many put money into Icelandic banks for the higher rates, presumably not asking why the rates were so good.

    I fear that a period of cold, hard realism may be needed before enough people are weaned off the mentality of ‘risk can/must be (has been) abolished’.

  • Eric

    One of the ironies of the situation is that HSBC last year was hit by a massive fine for anti-money laundering offences…

    That’s not so much irony as the cause of the policy. Expecting banks to try to figure out what I’m going to do with my own money when I withdraw it is the height of intrusive stupidity.

  • SC

    >I have been banking with HSBC (Midland) for 40 years without difficulties; my appliances last on average, problem free, for about ten years.

    I see, it’s my fault for being such a dick. Thanks for clearing that up for me.

    Thing is, having several bank accounts means you get to compare banks, and you notice that HSBC consistently have the worst service.

  • PeterT

    HSBC do however let you send money abroad using their online banking system. With Barclays you have to fill out a form on paper and hand it in at a branch.

  • I have written in the past about Hawala on this blog and I suspect we will be seeing more of hawala and hawala-like networks in the future, not less.

  • CaptDMO

    About Bitcoin…
    BitInstant,(NY) where one can apparently buy electronic blip bitcoin at a loss, for the purposes of it’s anonymity and “convenience”, apparently simply shut down.
    Faiella and Schrem were each charged (US) with conspiracy to commit money laundering, and operating an unlicensed money transmitting business. Up to 25 years each.
    Schrem also faces failing to file a suspicious activity report, +5 years.

    Failing to file a suspicious activity report.

    I wonder if international gold clearing/transfer houses, esp. those doing business “on-line” are subject to the same NSA world net patrolled “economic” issues?

  • Mr Ed

    Failing to file a suspicious activity report

    Not quite up there with one of Stalin’s offences during the Purges, when the substantive offence was ‘(coming under) suspicion of Espionage’, but nice enough for today’s values and the lack of mens rea.

  • Ernie G

    I heard of a case in the U.S. in which a banker in a small town bank questioned a depositor who was making a large and unusual withdrawal. It turned out that she was helping a Nigerian prince who was in a bit of difficulty and needed the money only temporarily. She said that she could vouch for his honesty and that he would pay the money back with a generous bonus as soon as things got straightened out.

  • Nick (BTF) Gray

    For years, Billy Connolly has been telling us, “It’s your money!” Mayby we should sue him for it?

  • Thon Brocket

    Bitcoin. It’s allodial money.