> Amazing how an experienced reporter can whip up three lines' worth of information into a half-page article. "Barclay's closes account of 17-year -old bitcoin-trading client after noticing a 50£ deposit of fraudulent origin. The bank eventually offers 40£ of compensation for having blocked the withdrawal of his 400£ balance for a few days." The article even includes three photos that show to readers what a 17-year-old and a bank look like.
A close friend had the same problem with Lloyds. Except the full funds to pay for his studies were frozen for 3 months and no apology or explanation was given. After 3 months writing letters to customer service, financial ombudsman, etc ... the account was closed, he was given a check and asked not to come back. (And I know first hand that no fraud was committed)
So wait, a bank offered to pay him 40 pounds because of their mistake that took less than a couple days to fix? As an American, that is amazing.
Banks here typically don't do shit even if you threaten to close your account when they screw up, and when they screw up they don't want to fix it at all unless you contact the Office of the Comptroller of Currency; the only exception is small banks and credit unions that actually do give a damn, and those, in my experience, are rare.
What are possible reasons of such behavior? Is it a lack of understanding of Bitcoin? Is it a malicious behavior motivated by fear? Is it AML related thing?
It's actually pretty reasonable behaviour by Barclay's and I say that as a bitcoiner myself.
The problem with attempting to do Bitcoin exchange is that there's a sea of hackers out there with access to other people's bank accounts. However, their access is pretty useless because they have no real way to extract the cash. ATMs have limits and require EMV cards which these hackers are unable to clone, and the only other way to get money out is a wire transfer .... to another heavily ID verified bank account. As they also can't beat the ID verification of the banks, they find themselves with access to money they cannot steal.
Enter Bitcoin. They now have the perfect solution: pick a victim Bitcoin trader or exchange, and wire the money to them as part of an anonymous Bitcoin trade. As the trader doesn't check IDs as well as banks do (or don't try at all), the hacker gets the coins without being able to be traced. The bank now has a couple of choices, none of them good:
• They can roll back the transaction leaving the trader with the bill, but this may be forbidden by certain banking rules
• They can eat the loss and block the trader to ensure it doesn't happen again
As rolling back transactions across banks is tricky and usually (always?) manual, eating the loss followed by account termination is usually the easiest path forward.
The solution is for local Bitcoin traders to do ID verification as robustly as the banks do. For that to happen, traders need to be educated and the tools need to be written. Android phones can upload dumps of the e-Passport NFC chips which are digitally signed, so an e-Passport dump + Skype session is usually enough to verify a counterparty to a high degree of confidence (excluding things like stolen passports that the hacker buys because they look similar). But the tools to do this don't really exist right now.
A 17 year old using LocalBitcoins is an uncontrolled risk to the bank. They have uncertain odds of committing money laundering and a certainty of causing dispropotionate chargebacks/reversals. Balanced against this, their business is worth less than nothing: the only reason you can open a checking account at all is to bring them other, more profitable business, in the future, as most operate at a loss.
Terminating their account removes the risk and costs the bank next to nothing.
Banks are very paranoid about criminals using their system, to the point that a slight suspicion triggers their internal police.
That's mandated by laws, government agencies and, to a very large extent, by the public. Look up HN discussions when HSBC got a small-ish fine for not doing enough to stop mexican drug cartels from giving them business. We were demanding jail time for everyone involved.
An easy solution is to avoid bank transfers for Bitcoin transactions, and instead to deal in cash.
Since Bitcoin is another form of cash, it becomes an exchange of one form of cash for another. There is no future risk of the transaction being reversed due to fraud.
In the specific example I know about, the transaction was simple: Student sells 1 bitcoin on localbitcoins. User (only known by his localbitcoins handle) transfers money to student account. Student transfers 1 bitcoin to user. Bank freezes the student's account.
They claimed the transfer was fraudulent but zero explanations were given. However they asked the student to tell the user to show up at a bank branch to vouch for the transaction's legitimacy. Obviously the user never responded to the request.
- Had the user been selling drugs?
- Was the user's account empty? Did he pay with credit and never payed back?
- Was he a known criminal to the Bank?
It's like selling a bicycle on ebay. If it turns out the person who paid for the bike was a criminal, how is the seller supposed to know? Wouldn't the bank be at fault for accepting the transfer if they know it comes from a fraudulent account?
I don't know about this specific example (Telegraph article), but I know of another example where the account was frozen and closed with zero explanations.
It was a personal anecdote followed by an extremely common bitcoin service. Anyone who's been in Bitcoin knows of localbitcoin or knows meeting in person is a common activity.
I've seen much worse astro turfing throwing off large discussions by unused accounts hundreds of days old, and no response from mods. Mod policy is arbitrary and cultish.
> Amazing how an experienced reporter can whip up three lines' worth of information into a half-page article. "Barclay's closes account of 17-year -old bitcoin-trading client after noticing a 50£ deposit of fraudulent origin. The bank eventually offers 40£ of compensation for having blocked the withdrawal of his 400£ balance for a few days." The article even includes three photos that show to readers what a 17-year-old and a bank look like.
https://www.reddit.com/r/Bitcoin/comments/330im7/barclays_cl...