After learning that a person could suffer "significant harm" if they were unable to access business banking, the City regulator has issued a warning to UK banks about rejecting accounts for sex workers.
While banks claimed they could, in theory, provide accounts for the adult entertainment industry, the Financial Conduct Authority (FCA) noted that in reality, they were frequently rejecting or closing business accounts.
According to the watchdog, lenders frequently terminated accounts due to financial criminality or concerns about their reputation. This is true even if paying for sex is prohibited in Northern Ireland, where sex work is lawful elsewhere in the UK.
A recent FCA roundtable meeting revealed serious concerns about a lack of access to financial services for individuals across the adult entertainment industry, which covers stripping, pornography, escort and dominatrix work and “full sexual service”, more commonly referred to as prostitution.
“As adult entertainment industry representatives explained to us, these account denials or terminations could lead to significant harm for individuals running those businesses, particularly if they then had to rely on cash or personal bank accounts for their work, with the latter revealing their name to their clients and therefore exposing them to blackmail,” the FCA said in a report released on Wednesday.
The regulator also heard that the family members of adult entertainment workers were also having their accounts shut. Sex workers have long complained that they are treated unfairly by lenders.
Some financial firms told the FCA they had found it difficult to balance financial crime regulations with financial inclusion, but said those controls may need to be “‘recalibrated” to reduce the risk of “inadvertently excluding consumers from the adult entertainment industry” who met their “account opening criteria”.
The FCA is now calling on lenders to issue a “clear and properly considered definition” of reputational risk to govern decisions around account closures.
Dr Raven Bowen, the chief executive of National Ugly Mugs, which provides support to sex workers, said it welcomed the regulator’s intervention.
It is the first time that the FCA has given such detailed guidance regarding the way banks handle the adult entertainment industry. UK Finance, a trade association for the banking and financial services sector, does not provide guidance for its members on the issue, and has previously said each bank would take a view depending on their commercial and risk appetite.
“We recognise some sectors experience greater challenges in accessing banking services,” said a spokesperson for UK Finance. “We are continuing to work with regulators, our members and relevant trade bodies to facilitate improved access to banking.
“If an account is closed, or an application refused, this only happens after extensive review and investigation. The main reason for this happening is dealing with financial crime concerns and banks have to follow strict regulations in this area.”
Under UK law, banking the proceeds of sex work does not qualify as money laundering and is not a crime. The restrictions are tight, though, because many similar activities—including running brothels, begging in public, pimping, and kerb crawling—are illegal.
The industries of adult entertainment and pornography, as well as sex workers, are not subject to any particular regulations. This can make it more difficult for private businesses like banks to evaluate potential clients because there are no officials to attest that work is being done in accordance with the law.
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