Bank Crime Rules Are Surprise Headache in Swedish Migrant Crisis

  • Asylum seekers without ID have trouble opening bank account
  • EBA offers compromise solution over money laundering rules

Banks around Europe are trying to figure out how to provide their services to asylum seekers while making sure they stick to strict rules blocking money laundering and terror financing.

By compelling banks to verify the identity of their customers, the requirements make it harder for would-be refugees without a valid ID to open a bank account. Without a bank account, it’s not easy to receive a salary.

QuickTake Europe's Refugee Crisis

It’s a situation worthy of a Franz Kafka novel: A bureaucracy that is preventing workers from filling shortages in key sectors of the economy.

The issue is particularly acute in Sweden, home to one of the highest number of migrants fleeing conflicts in Syria, Afghanistan and elsewhere in the Middle East.

In 2015, some 163,000 migrants headed to Sweden, attracted by generous asylum laws and a well-functioning welfare system. However, less than 500 of those waiting to be granted refugee status that year had found a job.

”It’s important that people get into the economy, get a job and get a salary,” Swedish Financial Markets Minister Per Bolund said in an interview. “At the same time, we have money laundering rules that demand that banks know their customers and are able to verify that they are who they say they are. These two things may be difficult to combine.” 

Growing Problem

The irony is that there are scores of jobs available. Sweden is currently experiencing an economic boom, fueled in part by extra public spending on migrants, with gross domestic product rising 4.5 percent in the final quarter of 2015.

What’s more, some 700,000 new homes need to be built by 2025 to address a housing shortage created by population growth. This means about 10,000 workers will need to be recruited each year in the construction industry alone. The Swedish Construction Federation says hiring more refugees is an obvious way to meet that demand. Vacancies also abound in the education sector and the government has started several programs designed to get migrants to fill them.

As waiting times for getting refugee status continue to grow, the problem is only set to become more acute.

Allowing more of the 170,000 migrants currently in limbo to work during the asylum process is also a way of reducing pressure on state coffers. The government has put aside 50 billion kronor ($6.1 billion) for spending on migrants in the 2016 budget.

The snag is that while asylum applicants are allowed to work, they need an exception from work permit requirements, an employer willing to hire them and valid identification.

According to Hans Lindberg of the Swedish Bankers Association, up to 75 percent of asylum seekers fail to meet the ID criteria.

Lindberg says it’s important for banks to have clarity on "what’s allowed and what’s not allowed, and that there’s no gray area left to interpretation."

A Solution?

Officials in Brussels say the European Union’s anti-money laundering directive provides governments with enough flexibility to ensure that "all consumers who are legally resident in the Union, including asylum seekers, have the right to obtain a basic payment account which offers services that are necessary in daily life."

And last week, the European Banking Authority issued an opinion stating that asylum seekers’ access to financial products and services is “important and necessary.”

To ensure asylum seekers are covered, it offered a solution: "In most cases, money laundering and terrorist financing risks -- including those associated with weaker forms of customer identification -- can be managed effectively by offering a more limited range of services or setting up stricter internal controls, which will facilitate early intervention in the event of suspicion."

Carolin Gardner, a policy expert at the EBA, said banks that make a good-faith effort to comply with anti-money laundering rules don’t need to worry that they’ll be held liable for violations if it later turns out that a person falsified his or her identification.

Sweden’s banks say they hope to hear back from the government and the Financial Supervisory Authority within the next month or two.

But time is running out. All European countries will be expected to have adopted legislation ensuring that residents have access to basic bank services by September.

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