British Prisons

Opening a bank account

Why do I need a bank account?

It is easier and cheaper to pay bills. Some employers will only pay you by putting the money into your bank account. It's safer than keeping lots of cash about the place.

What sort of account?

  • Most bank accounts fall into three categories:

  • A basic account. You can pay money into your account, get cash from an ATM and pay regular bills. You cannot overdraw and so you can avoid the risk of running up debts and incurring charges. They may be particularly suitable as a first account.

  • A current account. This is the most common. It does everything a basic account does but includes features like a cheque book and cheque guarantee card, a debit card (that allows you to buy things in shops and pay for them out of your current account) and the opportunity to negotiate an overdraft with your bank. But remember - nobody has a right to an overdraft; borrowing on overdraft costs money; if you go overdrawn without getting your bank's agreement they might refuse cheques and direct debits etc.

  • A savings account. This pays a higher rate of interest and is designed to help you save up for things. Usually there is no cheque book or debit card and you cannot pay bills from the account. Some accounts, especially those paying the highest rates of interest may require you to give notice before you can withdraw your money or may limit the number of withdrawals you can make.How do I choose a bank?
    Banks are not alike, so it pays to do some shopping around.

    Think about:
  1. What interest rates are paid?
  2. How close is a branch or cash machine to where you live, work or shop? What is the parking like or can I get there on public transport?
  3. How important is it to have free access to other banks' cash machines?
  4. Does the bank allow you to use post offices to pay money in, pay bills and withdraw cash?
  5. Does the bank allow you to use the telephone for things like checking how much you have got in the account or paying bills?
  6. Is there an option to use an internet service?
  7. Do you have any particular needs, such as braille statements, and how good is the bank at meeting those needs?
  8. Are there special services you will use a lot (eg sending money abroad)? Discuss these with bank staff and see which bank you think is best.
  9. Do you want a small overdraft facility, to cover temporary shortages (sometimes called a buffer zone) and how much will the bank charge for this?
  10. Does the bank subscribe to the Banking Code?

    Banks are different and that means some are better at some services than others. So you may want to have an account with more than one bank. You could save with one bank, have a current or basic account with another and ask for a personal loan from a third. It's easy to set up standing orders to pay money from one account to another.

    Don't be afraid to ask bank staff about their products and services and especially about anything you do not understand. Some people find it useful to have a checklist of questions.

    What questions will the bank ask me?

    By law, bank staff must verify your identity and your address. They cannot use the same document to verify both. You can ask them what documents are acceptable. Common ones are:

Gas, electricity, water or phone bill
Council tax bill
Driving licence
Current passport
Known employer's ID card
Pension or other social security book
Medical card
Inland Revenue documentation
Insurance certificate
Mail order statement

If you do not have the sort of documents the bank accepts, talk to the staff and explain what sort of documents you can produce. Banks have special procedures to deal with such cases, which may involve consulting a more senior person or specialist part of the bank.

You can get more information from reading the section "You and proving your identity".

Staff may ask you questions about what you plan to use the account for. They will do so to help you to choose the right one and to see if there are any other products or services you might be interested in.

Can a bank refuse to open an account for me?

Banks are commercial firms and no bank is obliged to open an account for anyone. If the bank has based its refusal on information about you from a credit reference agency (for example, discovering that you had been taken to court for non-payment of a debt), then they should tell you which agency they used. They do not have to tell you what the agency said.

You can write to that agency and, for a small search fee, ask for a copy the information they hold on you. If it is wrong, you can get them to change it. Then go back to the bank, explain the agency's error and reapply.

Is everyone entitled to open a bank account?

Anyone can
apply to open a bank account, though occasionally some people may find it difficult to find a bank willing to accept them. Children under the age of about 15 will not normally be offered a cheque account, although savings accounts will be encouraged. If you have been taken to county court for non-payment of debts, or if you have been declared a bankrupt, you may not find it easy to open anything other than a basic or savings account.

Your past track record may make you a credit risk, even if it was due to circumstances beyond your control. If you find yourself in this situation, then make an appointment with a senior member of the bank staff and be completely honest about the past. This is the best way to allow the bank to make a balanced decision based on all the facts.

What are my responsibilities in having a bank account?
Keep track of your money (eg by filling in the cheque stub). Always make sure there is enough money in your account for the cheques you have written and any other payments (notably direct debits and standing orders).

If you think you are going to run out of money and need and temporary overdraft, contact your bank - many will arrange them over the phone. Don't assume that the bank will lend you the money - it belongs to other customers and they have a duty to ensure they lend it sensibly.

When you receive a bank statement, check it carefully to ensure that it is accurate. Mistakes are rare but can occur. Tell your bank immediately if you think something is wrong.

If you are issued with a cheque guarantee card, keep it in a safe place, separate from the cheque book.

Report immediately to the bank any thefts or loss of cheque books or any cards.

More information about PINs and cards is contained in the Banking Code.

What are the bank's responsibilities to me?

The bank is bound by both the law and by various voluntary codes of practice to tell you how your account should operate.

Under The Banking Code, banks have to provide certain standard information to you, usually at the time when you open an account. This information includes a written outline of the key features of the service, and details about the terms and conditions of the service, as well as a published tariff of charges; any cash machine/ ATM charges; any additional charges and interest. The bank should also be able to provide this information to you, on your request, at other times.

The bank must not disclose information about your account to anyone except you. The only exceptions allowed in law are very narrow and are; where they are required to do so by law, there is a public duty (e.g. trading with an enemy in wartime), it is in the interest of the bank (e.g. in court cases), or you have consented.

The bank must maintain the account accurately and not pay out money unless it is in accordance with the instructions you have given them.This information sheet is one of a series of BankFactspublished by the British Bankers' Association and available separately.

Proving Your Identity

How money laundering prevention affects opening an account

You and Proving your Identity - How money laundering prevention affects opening an account

Why do banks and building societies ask you for proof of your identity?

Since 1994, when the Money Laundering Regulations became law, all banks, building societies, and other businesses providing financial services have had to put procedures in place to stop criminals from using them to launder their "dirty" money. This includes the need to obtain proof of identity and address from anyone who wishes to open an account or buy any financial product or service from them.

What is money laundering?

Money laundering means the methods criminals use to hide and disguise the money they make from their crimes. The term laundering is used because criminals need to turn their "dirty" criminal money into clean funds that they can use without arousing suspicion. Getting it into the financial system means that it becomes harder to trace and confiscate. Drug traffickers, armed robbers, terrorists, burglars and those who de-fraud members of the public all need to launder the proceeds of their crime.

What has this got to do with bank and building society accounts?

The first step in the laundering process for criminals is to get their money into an account with a bank or building society often using a false identity and address.

They can then transfer it to other accounts, here or abroad, or use it to buy other goods or services. It eventually appears to be like any legally earned money and becomes difficult to trace back to its criminal past. They can then spend it, or as is often the case, use it to fund more crime.

Banks and building societies are not only required by law to prevent this, but they are determined to stop criminals who wish to use them to launder the proceeds of their crimes.

How could this affect you?

A key defence against money laundering is to prevent accounts being opened in false identities. Anyone wishing to open or operate an account will therefore be asked for separate proof of identity and address, and often date of birth. Whatever type of account you want or whatever you want to use your account for checks will still need to be made.

The fact that these checks are carried out does not mean that you are suspected of money laundering. Criminals try to appear to be normal law-abiding customers, for example they may try to open a number of accounts using small amounts of money. So it is necessary to make checks on everyone. These checks will be needed whoever you open your account with - whether it is a building society, a bank, a credit card company, or a supermarket. A criminal could falsely use your identity if these checks are not in place.

What proof of identity will you need?

The best documents are those that are issued by an official authority, cannot be easily forged, and include a photograph. The same document cannot be used to prove both identity and address.

We need to check that you are who you say you are and you live where you say you live. Typical items asked for may be a current passport, a current full driving licence, a pension book or benefit book, a council tax or utility bill. However, other documents may be accepted - each bank or building society has its own arrangements. Some checks can also be done without asking you for proof, for instance a Electoral Register check, but you will always be asked to provide some direct proof yourself.

Is more proof needed for a postal, telephone or Internet account?

Any application to open an account where the building society or bank does not meet you face-to-face will need more proof of your identity and address.

By avoiding face-to-face contact with branch staff, a criminal (or an accomplice) has less risk.

What if I can't provide the documents suggested?

There are exceptional procedures in place to help customers who cannot provide the preferred documents.

Don't be put off by the mention of passports and driving licences. These tend to be the documents that are preferred because they are official documents and most people can provide them, but they are not the only way of enabling a bank to satisfy itself of your identity.

Many people have reasonable grounds for not being able to produce the recommended documents. For example, they may have never been abroad, so do not have a passport; have never learnt to drive, or their spouse pays the household bills. To help in these cases all banks and building societies have procedures that permit other proof of identity and address to be accepted.

Discuss with a member of staff what sort of documents you can produce. If necessary, the member of staff can refer your application to someone who is authorised to decide in exceptional cases.

Please remember though, the law requires that you must provide satisfactory proof of your identity and address. If you cannot meet these requirements, then under the law the bank or building society must not open an account for you.

Can't the bureaucracy be simplified?

The law requires that we have satisfactory proof of your identity and address.

The proof needed may change from time to time - criminals are always looking for new angles. The banks and building societies will continue to work with Government to ensure that there is sufficient flexibility within the system. Our aim is to ensure that all
 genuine applicants can have access to accounts and financial services. You can help by thinking about the documents you can supply and by discussing your situation with staff if you have difficulties.

Please help to prevent crime, and the laundering of the proceeds of crime, by being patient when staff asks you to provide documents to prove your identity and address.