Several high street banks are to cut daily limits on cash deposits made by their customers at post offices, after the UK’s financial watchdog put them “on alert” over money laundering.
Allied Irish Bank, Co-operative Bank and Handelsbanken, which permit cash deposits of between £10,000 and £20,000, told the Financial Times they would shortly tighten these caps. HSBC and Barclays, which permit maximum cash deposits of £9,000 and £10,000 respectively, did not immediately respond when asked about their plans.
The Financial Conduct Authority set out measures this week applying to banks that allow customers to deposit cash via post offices. Banks are now expected to move towards card-based transactions and to reduce the £20,000 cash deposit transaction limit, among other requirements.
The Bank of Ireland — which provides banking services for Post Office customers — lowered its cash deposit limit to £2,000 on Thursday.
Deposit limits have been a source of tension between banks and the Post Office, which says legitimate customers are being penalised and forced to travel to town centre bank branches to access services.
“We’ve seen a significant impact on legitimate customers being turned away, unable to do their transactions,” said Martin Kearsley, banking director at the Post Office. He said limits were too blunt a fix, while digital identification and “well-known customer checks” might be more appropriate.
Limiting deposits will help curb fraud but raises questions about the availability of banking services as cash use has fallen and bank branches close in favour of digital alternatives.
A Treasury report in 2020 identified large cash deposits as an area at “high risk of money laundering”. It said the Post Office offered fraudsters “greater anonymity” and “less scrutiny” as, unlike bank staff, they did not have access to an individual’s account information when they made a deposit.
The Post Office has played a prominent role in plans for shared banking hubs — physical branches that can handle the needs of customers from different banks and help those in rural and underserved areas. It said lower limits would also affect these services.
Businesses are more likely to be affected by changes than individual customers, particularly companies handling cash on a daily basis. They account for nearly half of all cash deposits at the Post Office but deposit larger sums.
Kearsley said lower deposits meant customers would need to visit branches more frequently, but they also faced new quarterly and annual limits on cash deposits.
The Federation of Small Businesses, a business lobbying group, said it supported the FCA’s aims but warned there needed to be flexibility to ensure legitimate businesses which relied on cash deposit services were not hindered.
“These controls should not unfairly burden small firms or impede their operations,” said Tina McKenzie, policy chair at the FSB. “The FCA must keep banks’ approaches under review to ensure small firms can continue to operate efficiently.”
The FCA said it had worked with partners including law enforcement, industry and the government to ensure individuals and businesses could still access “vital cash services” at the Post Office.
