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Keeping the bank sweet
Many of HSBC's small-business customers haven't been able to access their accounts for months. David Prosser asks what lessons can be learnt.
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No small business can do without access to its bank account. Yet in recent months, many of HSBC's small-business customers have suffered just that hundreds of accounts have been frozen as part of its response to a money-laundering scandal. There is no suggestion that these businesses have been involved in financial crime, yet they've been left unable to pay staff or suppliers, or to take payments.
So far, the Financial Ombudsman Service, which can hear complaints from the smallest firms, has sided with HSBC, arguing that it is legally obliged to comply with money-laundering rules. But HSBC executives must also be keenly aware that they have until the end of this year to prove to US authorities that their money-laundering controls now work. Five years ago, the bank was fined £1.5bn after it unwittingly allowed Mexican drug cartels to move money through its network. A probation deal over this is set to expire in a few months.
HSBC's desire to avoid further run-ins is understandable, but it's not much help to the firms left unable to trade as a result. So how can other small-business customers ensure their bank doesn't treat them the same way? The short answer is that it's crucial to respond to all requests for data as quickly, which means keeping good records is vital. So too is knowing what sort of things worry banks.
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A big concern is that customers are who they say they are. Your firm may not be directly required to conduct due diligence on customers, but your bank may need you to make basic checks, particularly for high-value transactions (more than €10,000 under European Union rules). Overseas clients may attract extra scrutiny you must be able to help your bank establish that these are legitimate trading partners. Be especially wary if your clients include "politically exposed persons" (essentially anyone in public office, either at home or abroad). Banks have to make extra checks to ensure these individuals aren't engaged in corruption. Exercise extreme care if you are considering dealing with countries or individuals affected by sanctions either those agreed globally or put in place by specific countries. Take professional advice first.
One other lesson is worth heeding. Many affected HSBC clients complain that speaking to the bank has been very difficult, with calls often directed to contact centres. Like other large banks, relationship managers are now far less common at HSBC. Small businesses don't always need personal service from a bank, but there are times when it helps. Consider this as you review your banking arrangements.
Celebrate SMEs this December
Small businesses looking for a pre-Christmas sales boost may be able to benefit from Small Business Saturday, the annual initiative aimed at encouraging people to spend at small and medium-sized enterprises rather than big businesses. The organisers have confirmed that this year's event will take place on 2 December, and activity is now ramping up.
This year marks the fifth birthday of the campaign in the UK. It was inspired by a similar annual event in the US, and now offers a counterpoint to Black Friday and Cyber Monday, which have become staple pre-Christmas marketing endeavours for many larger firms. The organisers reckon that last year's event earned smaller businesses an additional £717m of sales, up 15% on 2015.
The campaign is largely a grassroots affair, with Small Business Saturday organisers encouraging firms to promote the initiative in the weeks and days leading up to the event, as well as on the day itself. While independent retailers are in prime position to benefit, smaller businesses in other sectors have also exploited it successfully. See the Small Business Saturday UK websitefor details.
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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.
