Immigration Act 2014 (Current Accounts) (Excluded Accounts and Notification Requirements) Regulations 2016

Monday 12th December 2016 Grand Committee

Motion to Consider

16:24

Moved by

[Lord Young of Cookham]

That the Grand Committee do consider the Immigration Act 2014 (Current Accounts) (Excluded Accounts and Notification Requirements) Regulations 2016.

[Lord Young of Cookham (Con)]

My Lords, the Immigration Act 2016 contains provisions to require banks and building societies—henceforth referred to as firms—to carry out immigration checks on certain accounts and prevent continued access to banking for known illegal migrants. The 2016 Act also delegated to the Treasury the power to make regulations that determine the details of how the regime will work in practice.

We need to deter people from attempting to enter the UK unlawfully and to ensure that those who are here illegally are encouraged to leave or to regularise their stay. Effective immigration controls require responsibility to be shared between the public and private sectors. Recognising this shared responsibility, the Immigration Act 2014 took a series of actions to limit the services available to known illegal migrants. These included prohibiting firms opening accounts for a disqualified person—an illegal migrant liable for removal or deportation whom the Home Secretary considers should be denied access to a current account.

Disqualified persons are those who have exhausted all appeal rights. They will have had the opportunity to attempt to regularise their status in the UK, including by raising any reason why they are exceptionally vulnerable or unable to return to their home country, but they will have either failed or not attempted to do so.

Details will not be shared with banks regarding individuals who still have outstanding applications or appeals for residency, leave to remain or asylum. Before opening a new current account, firms are able to check the applicant’s immigration status with CIFAS, a specified anti-fraud organisation. Where the check identifies that the applicant is a disqualified person, the firm must refuse to open the account.

The Immigration Act 2016 builds on these measures and targets accounts that are already open. This may be because the account was opened before the 2014 Act came into force or because the account was opened legally by a person who later became disqualified because of a change in their immigration status. Firms are required to check details of their personal current account holders against the details of disqualified persons provided to them via CIFAS. They are then required to report the results of those checks to the Home Office and, if instructed by the Home Office, to take action to close accounts or prevent continued access to accounts.

The Government recognise that this is a significant undertaking for firms. Treasury officials have informally consulted the industry on both the 2016 Act and the regulations that we are discussing today. That has informed the policy decisions made in the regulations. We have acted to try to minimise the burdens where possible, while ensuring that the regulations achieve the policy intention of preventing continued access to banking services. The Government have prepared an impact assessment for these regulations, which received a positive green opinion from the Regulatory Policy Committee.

The regulations should be read alongside the Immigration Act 2014 (Current Accounts) (Compliance &c) Regulations 2016, which were made on 7 November. This negative statutory instrument provides that banks must carry out immigration checks on a quarterly basis; it sets out the information which the Home Office must provide to a bank in response to notifications; and it sets out a requirement on banks to inform the Home Office of steps they have taken to comply with the duty to close accounts.

This statutory instrument covers three main areas: the types of accounts that firms must make immigration checks on; the requirement for firms to notify the Home Office of accounts they hold for disqualified persons; and provisions to enable the FCA to monitor and enforce compliance in respect of breaches of the regime. I will take each in turn.

Not all bank accounts are within scope of the requirement to make an immigration check under the 2016 Act. This instrument specifies that current accounts operated by or for individuals who are acting for the purposes of a trade, business or profession are excluded from the requirement to make an immigration check. In practice this means that firms are required to conduct checks on existing personal current accounts. Firms are not required to extend checks to all existing current accounts such as corporate or business accounts. This ensures that the checks undertaken by banks are appropriately targeted and proportionate. This reflects the Government’s ongoing view that current accounts are the gateway product to other financial services and a settled life in the UK. Such an account would be expected to provide functionality to hold deposits and make withdrawals without having to give notice. It would also typically enable the customer to receive and make payments through a number of different methods, including by cheque, direct debit, standing order, continuous payment authority or other electronic payments. Withdrawals, money transfers and other payment transactions can typically be conducted through various channels including ATMs, branch, online, mobile or telephone banking. Many current accounts also have overdraft facilities.

16:30

For the purposes of the Immigration Act, “current accounts” should also continue to include “basic bank accounts”. The requirement to make an immigration check does not apply to savings accounts, which in the Government’s view are intended to be opened for the primary purpose of accruing savings and not for day-to-day transactional banking, but which may provide some of the functionality I have just referred to. This also takes into account existing prohibitions in the 2014 Act, which mean that a disqualified person cannot evade the legislation by closing their current account and opening a business account as a sole trader or a charity.

I turn now to notifications. If a firm makes an immigration check on a personal current account and finds a match, the bank is required to notify the Home Office using a secure Home Office portal. To allow the Home Office to confirm the match and instruct on next steps, this instrument requires firms to provide certain information. This includes details of any other accounts that the firm holds for the disqualified person and the balances held in those accounts. Information about regular payments into accounts above a threshold of £200 has been included to allow the Home Office to identify patterns of payments that may constitute evidence of illegal working. The requirement to provide information is limited to what firms hold and can retrieve. It does not require the further investigation of data not held. The Home Office will then confirm the match, based on its data, and instruct the firm on the next steps.

Depending on the information provided and the details of the disqualified person’s case, the Home Office may apply to a court for a freezing order or notify the firm that it is under a duty to close any accounts it holds for that person. Noble Lords may be interested to know that the Home Office is preparing a code of practice on freezing orders, which will be laid before Parliament in advance of the implementation scheduled for October next year. Where the firm is notified of its duty to close accounts, the 2016 Act provides that it will be able to delay closure for a reasonable period to recover debt or manage the effect on third parties. Firms will also be able to comply with the duty without closing an account if they are able to take steps to prevent that account being operated by the disqualified person. Firms are required to provide the Home Office with information about the steps that they have taken to comply with the duty.

Finally, this instrument also enables the FCA to monitor and enforce firms’ compliance in respect of breaches of the regime introduced by the 2016 Act, mirroring the existing role of the FCA for the purposes of the 2014 Act. I hope that noble Lords will agree that these regulations strike an appropriate balance. On the one hand they achieve our objective to prevent continued access to banking services for disqualified persons, but on the other the action they require of our firms is appropriately targeted and proportionate. I beg to move.

[Lord Tunnicliffe (Lab)]

I thank the Minister for introducing these regulations so thoroughly. We have no intention of opposing this instrument, but I would like to ask the Minister for some clarity around a number of points. In the interests of expedition, I will be content to receive a letter if that is helpful. I also have no intention of making this a broader debate about immigration policy. This is neither the time nor the place because that subject will be at the heart of our political discourse in the coming years and colleagues will have appropriate opportunities to air their views.

I recognise that business accounts can be easily identified and will therefore be easy to exclude from checks, but what procedures are in place when the situation is not as clear? Can the Minister also outline what is required of firms if there is a query over the bank account status; in other words, if there is some debate over the status of bank accounts, how much of the burden of responsibility will rest with the firms to investigate?

On consultation, why was an informal consultation thought to be sufficient, rather than a more substantive discussion between the relevant stakeholders? The information that firms are required to send the Home Office seems comprehensive but I would be interested to know what differences of opinion were expressed about which data were necessary between different firms and, indeed, between firms and the Government. Finally, to give us some feel of the mechanism, I ask the Minister to outline what will happen if regular payments of £200 are found to have taken place. How will this information be shared and how will the relevant authorities liaise?

[Lord Young of Cookham]

I am very grateful to the noble Lord for his welcoming of the measures before us. He generously said that he would accept a written reply to the issues he raised. It is an offer that I accept with open arms. A letter will be on its way as soon as practicable, and I am very happy to place a copy in the Library so that it is of broader interest. I beg to move.

Motion agreed.