‘Computer says no’ approach locks refugees out of vital financial services

Experts urge financial industry to reconsider realities of refugee life in application process

A ‘refugees welcome’ banner in Bristol in support of Ukrainian refugees (PA Wire)

Inflexibility, misunderstanding and process-based discrimination is locking refugees and asylum seekers out of the fundamental services they need to establish a settled life in the UK, experts have warned.

With a national focus on helping refugees from countries like Afghanistan, Syria and now Ukraine to get over the initial hurdles around resettlement, problems are now arising when it comes to subsequent needs – including earning an income, setting up businesses and claiming benefits.

Important rules over ID checks protect the industry, customers and wider society from the impacts of money laundering and fraud, for example. But these in particular can cause serious issues for those now trying to prove their identification, recent personal and business financial histories after fleeing with precious few documents.

“Refugees often flee their home countries hurriedly – many arrive without passports or other forms of ID – and thinking of bringing the paperwork that validates their previous credit history is the last thing on their minds,” notes Mikkel Velin, CEO of alternative financing company YouLend.

“Many traditional financial institutions can only entertain their applications if they receive two years’ worth of business filings, or utility bills from the past six months.

This means that they are unlikely to give accounts to migrants, especially refugees, due to Know Your Customer (KYC) requirements with stringent identification requirements.

The system in the UK, which divides refugees into two broad categories, doesn’t help either.

Those who are part of a resettlement scheme have arrived in the UK through an arrangement with the government and, settled by a local authority, are set up in their first week with a tenancy and a biometric ID card.

Crucially, they are also assisted in arranging a bank account, through which the government pays their benefits.

Proof of address via a tenancy agreement, an ID card and a bank account provide the fundamental tools needed for them to then seek and secure paid employment or to start a business and build a new life longer-term.

However, refugees who arrive in the UK under their own steam – considered asylum seekers until their refugee status is confirmed – are supported by a separate system under which the Home Office simply provides them with a prepaid card.

“Once the government says yes, you are a refugee, there’s then only a 28-day window to transfer you over to the refugee system – during which you’re expected to sort yourself out with somewhere to live and a bank account to put your income into,” explains Judith Dennis, policy manager at the Refugee Council.

“There’s an assumption that because you’ve been in the country for a period of time, you know what you’re doing.”

In fact, she believes this often creates a vicious cycle in which refugees don’t have sufficient information to secure a bank account and other services, because they don’t have a UK bank account or credit history already.

“There are also problems around things like English use,” Dennis adds. “An interpreter can relay information, but we know that banks and building societies then sometimes have concerns over whether the applicant really understands the agreement, and halt the process.”

“There’s no doubt due diligence is important, but we need so see more flexibility,” Dennis adds, noting that some individual bank branches, for example, have proactively investigated the kind of proof of address and ID documents available to refugees, and, within the rules set out by the financial regulator, explored other solutions with their new customers.

“I’d like more financial service providers to look past the ‘computer says no’ approach, and consider what they can do to help more flexibly. They need to make it their business to understand.

“If, for example, a prospective customer comes to them without a proof of a permanent address, that means they’re not eligible for one product, staff could look at other services that customer could access to instead,” says Dennis.

“After all, we’re only talking about getting a foot in the door with the most basic of accounts, we’re not talking about securing mortgages or huge loans at this stage.

Velin is more direct.

“The main issue is (possibly subconscious) discrimination and misunderstanding around what data is really needed, in the 21st century, to determine whether someone is eligible to access certain products and services,” he asserts.

“The current financial services system relies heavily on backwards-looking data points, particularly for financing, such as credit repayment history – and for those looking for business financing, trading time and number of employees are often also crucial eligibility requirements.”

“Financial exclusion and cultural or racial bias can make it difficult for refugees to find jobs and start businesses, even if they have the skills and experience to do so. For many, entrepreneurship will give hope of a successful life wherever they settle, but they are held back by their move between separate financial systems or jurisdictions.

This is especially difficult for those who already have the ability to immediately start supporting themselves, perhaps with an online-based small business or by taking jobs on gig platforms, but who cannot do so because of an administrative blocker.”

Velin believes a lack of access to bank accounts and financing/credit prevents many refugees and migrants from improving their financial standing and achieving financial freedom.

“Additionally, being unable to integrate from an economic perspective often limits their ability to integrate culturally and establish social ties in their communities.

This loss of potential cultural diversity and economic value add is a direct result of financial exclusion and can have lasting repercussions on key economic indicators.”

“Governments and regulators have a lot on their plate with the current economic environment, but they must answer this particular call,” Velin says.

“It is possible to drive financial inclusivity – and some members of the industry are already pushing for it – but only governments and regulators can make the changes stick,” he warns.

The Refugee Council, Scottish Refugee Council, Welsh Refugee Council, Migrant Help, Citizens Advice and Refugee Action all offer further information on financial assistance and support for refugees, asylum seekers, sponsors and other supporters.