NO WARNING: Westpac closes $1m crypto business bank account

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Aussie banks seem to think crypto is too hot to handle – but what’s the real reason behind the constant closure of crypto related accounts?

Two weeks ago, Rewards4U co-founder David Jenkins received a letter out of the blue from Westpac saying their business bank account containing more than $1 million will be closed on September 30.

The letter provided no reasons for the closure of the account.

“It’s pretty clear they’re targeting us for our crypto related activities, so we’ve made a formal complaint to the financial ombudsman,” Jenkins said.

“Obviously we cant stand up in court and say this is why they did it, but why would you shut a business down with $1m in its account unless you thought they might become competition at some stage?” he asked.

Banned from the related banks too

The account closure also means Rewards4U is effectively black banned from Westpac’s related businesses: St George, Bank of Melbourne, Bank SA, BT Financial Group and Rams.

David Jenkins

Rewards4U is an Australian startup that uses tokens in place of traditional loyalty points.

It’s being trialed out at 40 businesses on the Gold Coast, and enables users to spend their tokens at a variety of businesses.

The RWDS token currently trades on three exchanges: P2PB2B, Xrates and BTCEXA.

Too legit to quit

Rewards4U did not conduct an ICO, however it is registered with AUSTRAC and is a member of both Blockchain Australia (ADCA) and the World Blockchain Chamber of Commerce.

“We are compliant with all AML/CTF requirements through Rapid ID … we’ve never had any financial or other compliance issues since inception,” he said.

Most crypto businesses in Oz have similar issues

The majority of cryptocurrency related businesses in Australia have reported trouble securing or keeping bank accounts including major exchanges such as Coinspot, which was forced to suspend Australian dollar deposits in early 2018 as a result

In January this year MyCryptoWallet was crippled after National Australia Bank unexpectedly closed its accounts, forcing it to suspend withdrawals.

A Rewards4U user tries out the app

(Incidentally, MCW users on Twitter report the exchange is still have many issues with withdrawals – CEO Jaryd Koenigsmann told Micky today that not all users were affected and the company was “still with our lawyers regarding this situation and we will be able to provide more information mid October.”)

Bitcoin Babe also reports being been banned from dozens of Banks and many other users have had their accounts frozen after sending money to cryptocurrency exchanges.

But Westpac says crypto is OK, within reason

Westpac’s official position is that: “We do not restrict use of accounts in relation to cryptocurrency as long as the use complies with our legal obligations and terms and conditions.”

The bank is also involved with blockchain and cryptocurrency: it is listed as a customer of Ripple and it participated in the Lygon blockchain bank guarantee project trial in July.

Westpac has also put $150 million in its Reinventure division which in turn has invested in projects including Coinbase.

“They’re cahoots with Coinbase, so that’s crypto related,” said Jenkins. “Which is really weird. We’re being shut down for exactly the thing they are promoting.”

Rewards4U for business

Former banker gives opinion

Former ANZ and Westpac banker Rod Tasker – now a management consultant with a keen interest in blockchain – said there’s no big conspiracy behind the major banks’ reluctance to provide services to crypto related businesses.

“I think it’s more to do with AML/CTF (anti money laundering/counter terrorism financing) at the moment than anything else really,” he said.

“It’s one of those things where the risk, and the fines for breaching money laundering laws, are so large – millions of dollars – it’s not worth the risk from a banks’ point of view.

“The issue is if something happens outside your sphere of control you can still be liable for it in an AML/CTF sense so it’s easier to rule that whole segment out.”

Not sure that adds up any more

Jenkins said that may have been a reasonable position in the past but his company now has to comply with a 180 page AML/CTF manual – and has contracted a respected third party specialist called RapidID to ensure the integrity of verification information.

“A year and a half ago i would have suspected something along those lines but I don’t think those arguments wash any more, I think it’s anti competitive,” he said.

Jenkins said he’d always been mindful of threat of bank account closure, and had maintained a secondary account with another bank. He’s in the processing of transferring the funds across.

“It’s going to embarrass them when we have $1 billion in their competitor’s bank account and go tell their shareholder at the AGM.

“Maybe they’ll stop their anti competitive behavior.”