Trustees facing declining banking options

Trustees are currently finding it increasingly difficult to open and maintain bank accounts as banks withdraw from the trust business and implement more stringent eligibility criteria, STEP, the professional body for trust and estate practitioners, has cautioned. This predicament spans across international trust jurisdictions, impacting legitimate trusts that are attempting to access essential banking services.

In the UK, the authors of STEP's new Trust Banking Due-Diligence Toolkit highlight that only one mainstream bank appears willing to consider opening an account for a straightforward trust unless it holds significant values or offers other financial incentives, such as investment management opportunities. Emily Deane TEP, Technical Counsel and Head of Government Affairs at STEP, expressed concern, stating "Trusts are legitimate and widely used legal arrangements, yet trustees are increasingly struggling to access the banking services they need simply to administer them."

Deane acknowledged the banks' crucial role in preventing financial crime, remarking "Banks have an important responsibility to prevent financial crime, and nobody is arguing that those safeguards should be weakened." However, she emphasized that legitimate customers ought to be assessed based on the actual risks they present, rather than being excluded solely due to their classification.

Trustees also face the alarming reality of existing bank accounts being closed, often without adequate notice or explanation. With banks holding significant discretion over customer relationships, trustees may find themselves with limited options once a decision to close an account has been made. STEP contends that the driving force behind this issue is not the legal unsuitability of trusts for banking but rather the compliance burden that accompanies them.

When banks need to identify and verify trustees and comprehend the broader structure of ownership, benefit, and control—which may include settlors, beneficiaries, and protectors—onboarding trusts can become considerably more complex. Despite this, STEP argues that such blanket de-risking contradicts the risk-based approach recommended by regulators. The UK's 2025 National Risk Assessment evaluates the overall risk posed by UK trusts as low and notes extremely low levels of identified misuse, acknowledging that only certain high-value, complex, or international structures carry greater risks.

To assist trustees, STEP has published its Trust Banking Due-Diligence Toolkit, which is designed to help trustees anticipate the information banks are likely to require and to present it in a structured, consistent, and verifiable manner. This toolkit aims to be useful when opening accounts and maintaining banking relationships, covering everything from trust structures and beneficial ownership to source of wealth and expected account activity.

The Toolkit also offers practical resources, including a bank-facing trustee banking memorandum, a beneficial ownership diagram, a source-of-wealth narrative pack, a beneficial ownership register compliance pack, and a trustee authority and mandate pack. STEP argues that more transparent and reusable information could facilitate banks in conducting proportional risk assessments while sustaining necessary anti-money laundering and counter-terrorist financing protections. The organization plans to continue its engagement with banks, regulators, and governments to advocate for fairer rules and practices without compromising the integrity of financial crime safeguards or increasing risks.