Bank concerns Dispute Erupts Over Refugee Accounts

German banks fear they could be exposed to U.S. sanctions for accepting IDs from refugees that are not of the same high standard as passports. Germany's banking watchdog has instructed the banks to accept foreign ID cards but banks worry about the implications if the accounts were to be used for crime.
How far should ID checks go?

On the anniversary of the deadly attack on the satirical magazine Charlie Hebdo last week, a man tried to force his way into a police station in Paris. Officers shot and killed the attacker, who it turned out had lived in a refugee hostel in Germany.

The foiled terror attack triggered a controversy between bankers and German politicians over the credentials needed to set up a basic checking account at banks in Germany.

The problem is that, in theory, the Paris attacker could have opened an account in Germany that could have been used to finance terrorist activities or launder money, a nightmare that the banks in Germany fear. It emerged that the refugee slain in Paris was a follower of the Islamic State terrorist organization and had been registered under various aliases in Germany.

"This case shows very clearly where the problem lies," Michael Kemmer, general manager of the Association of German Banks, said on Wednesday in Berlin. "It would be prudent to insist that the proof of identity of any person coming into a bank to open an account is as airtight as possible." Banks simply cannot afford to take a laissez-faire approach, Mr. Kemmer added.

If a refugee's account were ever to be used for mischief and a district attorney from New York goes after the refugee’s German bank and demands to know what it did to verify the customer's identity, it won’t be good enough for the bank to just cite an advisory from BaFin. Andreas Krautscheid, Association of German Banks

Banks have been up in arms for months about an advisory from the German Federal Financial Supervisory Authority, or BaFin. A few months ago, the agency decreed that ID documents issued to refugees by German alien registration authorities should be considered sufficient to open a bank account.

Normally, applicants for a new account are required to show their passport. The new rules were to be applied temporarily until a new comprehensive law comes into effect. Under the new law, banks will be required to offer all citizens a deposit checking account.

The questions reflect the broader issues in Germany as the influx of asylum seekers continues unabated. The country accepted 1.1 million refugees last year but the authorities are struggling to register and house the people fleeing war and poverty. Politicians are increasingly divided over the number of refugees the country can handle and calls are growing louder to help refugees to find work and integrate into the economy and society.

Massive Influx of Refugees


Ralph Brinkhaus, deputy parliamentary floor leader of the ruling center-right Christian Democratic Union, also criticized the banking guidelines advisory. "It’d be problematic to permit differing legal standards for German residents on the one hand and immigrants on the other," Mr. Brinkhaus told Handelsblatt. Lawmakers plan to hold a hearing in the next few days on the bill, which could possibly lead to amendments.

"We urgently need the law," said Andreas Krautscheid of the Association of German Banks. "If a refugee's account were ever to be used for mischief and a district attorney from New York goes after the refugee’s German bank and demands to know what it did to verify the customer's identity, it won’t be good enough for the bank to just cite an advisory from BaFin," said Mr. Krautscheid. Jürgen Fitschen, the co-chief executive of Deutsche Bank, voiced similar concerns. German banks fear that such incidents could lead to severe sanctions.

The German Finance Ministry (BMF) does not share the banks' concerns. "The implementation of BaFin's administrative rules on opening accounts for refugees is not in violation of international standards or regulatory requirements in individual countries, such as the United States," said a spokeswoman. She also noted that finance ministry officials had spoken with two leading German banks, which had initially expressed doubts over the new rules but had dropped their objections after the meetings.

The Finance Ministry points out that when a basic checking account is opened with a bank, it is required to monitor the account. Given concerns over money laundering and funding for terrorism, certain abnormalities, such as false identities, can be quickly detected.

Jens Zimmermann, a financial expert with the center-left Social Democrats, agrees with that assessment. He has little sympathy for the lenders' worries. "So far, the banks have not been able to demonstrate what legal problems they would face in the United States," the SPD politician said.

On the other hand, he added, retail banks have fiercely resisted the establishment of basic checking accounts for years. "For that reason, I think it's outrageous that banks are now using their own shortcomings in fighting money laundering as an argument to keep out unwanted groups of customers," Mr. Zimmermann said.

"Abuses cannot be ruled out," argued Greens Party politician Gerhard Schick, but he noted that this cannot be used as a reason to deny bank accounts to refugees and immigrants.

Frank Drost is a Handelsblatt Editor in Berlin, covering financial supervision and banks. To contact the author: [email protected]