First Direct demands customer ID proof

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First Direct statementOnline and telephone bank First Direct fears its earliest customers may be money laundering criminals and is demanding proof of identity and address. Some have been customers since the bank was started in 1989. It wrote "we now hold incomplete proof of identity and address for a number of our customers". It says it has "fallen short" of the "highest possible standards".

AOL money understands the bank started checking on customers after the record $1.9bn fine for parent HSBC for lax money-laundering controls in December 2012. The British Bankers Association said: "This is not an industry-wide issue". Announcing its recent results HSBC said its compliance and risk bill has risen by around one-third in the past year to $800m (£475m).

Bank accounts frozen

Bank security experts told AOL Money any customer receiving the letter should provide the information as quickly as possible as the bank may refuse basic banking functions, such as cash withdrawals, bill payments and transfers. This could also affect customers with joint accounts where only one person has received the letter.

First Direct would not say what sanctions it would take if people failed to provide the information demanded. It said: "We treat all customers on a case by case basis, but not responding may limit our banking relationship with a customer."

Approved secure ID

First Direct has given customers a list of approved documents for proving their identity and a second list the bank will accept for proof of address. Because First Direct has no branches for customers to visit, the bank has also provided a list of approved people who can sign photocopies of the document.

The letter warns: "It is critical we receive this information back from you as soon as possible. If we don't we may not be able o open any further accounts for you or provide you with additional products and services."

First Direct comment

First Direct refused to say how many customers were affected or whether HSBC high street banks had similar levels of unidentified customers, claiming the issue was "commercially sensitive".

It told AOL Money: "The personal details we ask our customers are standard 'know your customer' pieces of information which prove their identify. For existing customers where some of our records are incomplete, often because 'KYC' requirements were different when they joined the bank, we may ask them to show us updated documents.

"We understand that this may seem burdensome to customers who have banked with us for many years, but banking standards are higher now and we try hard to balance these obligations with a convenient ongoing banking service."