Bank Accounts Flashcards
Bank accounts?
Banks offer a range of different accounts with different features
Terms & Conditions of similar accounts vary between banks
Some types of accounts are aimed at particular types of customers & therefore can refuse to open an account for any person that doesn’t fit criteria set
What is a basic bank account
Combines place to keep money to meet day to day expenditure
Unable to go overdrawn if insufficient funds available
Offer features similar to current; debt cards, direct debit, standing orders, possible to receive funds into account
Outline current accounts
Used for day to day banking services
Customers can withdraw money on demand
Interest at low rates
Services;
- cheque book
- direct debit & standing orders
- debit card provide access to ATM
- BACS payment
- overdraft facilities
- telephone/ internet banking
- Sept 2013 current account switching service launched, allow accounts to switch with all existing direct debits & standing orders transferred to new accounts = 7 days
- unique service help increase competition in banking sector
What are the benefits to banks for current account holders
More services used generated greater income (interest & transaction charges)
Provide cheap source of funds
Outline savings accounts
Suitable for customers that seek return on savings while keeping them in secure/ accessible place
Require notice to withdraw funds
Higher interest rates
Banks offer a range of different savings accounts (FORM II)
Outline the types of savings accounts
FIXED TERM DEPOSIT
- customer agrees deposit of fixed sum for specified time period
- no payment facilities
- high interest rates / increase over duration
- penalties for breaking contract
ORDINARY DEPOSITS
- everyday access
- interest paid
REGULAR SAVINGS
-minimum savings amount required monthly
MONTHLY INCOME
- returns on money
- lower interest rates
INSTANT ACCESS (ATM cards)
- require large initial investment
- instant access to funds without loss of interest
- interest rates in accordance with level of funds in account / not payable if funds fall below minimum balance (£5000)
INVESTMENT ACCOUNTS
- suitable for large lump sum / tied up money for certain period
- high interest
Outline sharia compliant accounts
Designed to run in accordance with Islamic laws
No interest charged on bank accounts
Don’t let accounts go overdrawn
Supervised by Islamic scholars to endure account operates in accordance with Islamic laws & finance
*cants make money on money
Opening a bank account
Code of Banking Practice sets standards on account opening;
Banks & building societies are required by law to satisfy themselves about identity of a person seeking to open an account to assist in protecting themselves, customers & members of public against fraud & other misuse of banking systems
Prospective clients informed of docs required
AML requirement
Outline steps involved in opening a bank account
- customer chooses type of account required
- customer completes application form
- customer provides due diligence docs to prove their identity
- account is funded & opened
- rationale for opening account, activity of entity, source of funds & wealth (activities that generate total net worth) & expected volume/ value of transaction likely to be requested by banks
- banks try identify account that present high risk (I.e connect to PEPs)
Outline the type of CDD docs required
*usually certified
Individuals;
- passport / driving license
- utility bill to verify residential address
- credit check/ bank statement to verify wealth & earnings
- employment docs verify source of funds
*corporate applicants asked to provide CDD in respect of controllers (directors, shareholder or account signatories)
Company;
- M&As
- CoI
- COGS
- Board of resolution authorising account to be opened
- ROM & ROD
- signatory list of company
Trust;
- Trust deed
- settlor
- beneficiaries
- any protector
What are bank mandates
Contract between the bank & customer setting out the T&Cs of the use of banking services
States respective rights & obligations
-when account is opened customer signs mandate (forms part of opening docs) & it appoints bank as banker & authorised them to open the account
Sets instructions that banker must follow;
- honour all cheques
- accept/ act on instructions made (payments)
- sets signatory list to whom to accept from
- allow account to go overdrawn
- close account
Outline facsimile indemnity agreements
Customer wishes communication with bank by fax / bank insist indemnity which absolves them from responsibility & against claims it may incur due to acting on faxed instructions
Indemnifies bank against liability & loss
Characteristics when choosing a bank account
- account charges
- fees (transparent & reasonable)
- interest rates (tax paid on gross)
- accessibility of funds (notice requirements)
- choice of currency
- compensation agreements
- 24 hour facilities
- internet & telephone banking
- international transfers
- minimum balance requirement
- sharia compliant
- beaches (local or international)
Steps in closing a bank account
Possible to close accounts at any time without charges / penalties
Some accounts have conditions upon closing (fixed deposit) - these must be made clear prior to opening
Bank could decide to close account & give reasonable notice to allow customers to make alternative arrangements
