Yacht brokers faced ruin after new regulation -aimed at combating money laundering - prevented them opening client accounts. The regulation threatened a £3 billion a year industry.
The interpretation by the FCA (Financial Conduct Authority) regulations by the major banks in the UK could have left all yacht brokers fighting for their existence.
So the ABYA (the Association of Brokers & Yacht Agents) has been seeking clarification of the potentially fatal regulation that was excluding yacht brokers from being able to open such accounts.
Client accounts allow brokers to offer a secure third-party banking facility during a yacht purchase. They facilitate the transfer of funds between the buyer and seller only when the marine legal conveyancing is completed and is entirely separate from the broker's trading account, protecting both parties should the broker become insolvent.
It's a remarkably efficient way of keeping what can be a complicated and fraught transaction as straightforward and professional as possible.
"The problem first came to light in April this year when a new ABYA member applied to their HSBC branch to set up a ‘Client Account' for their brokerage business," explains Jane Gentry, Chief Executive Officer of ABYA.
"They were told that because of the new FCA regulations, none of the banks were allowed to create this kind of account, unless the business applying for it was accredited by the FCA."
Having been refused, the applicant contacted ABYA to see if it could shed any light on the matter. It appears that, following some less than scrupulous dealings in the USA, similar accounts had been used illegally to launder money, and the banks involved received heavy fines from the regulatory authorities. In reaction to these fines, all the big banks initiated a clamp-down on creating Client Accounts, unless the customer was another bank or financial institution.
"This blanket interpretation of the FCA regulations by the banks would have had dire consequences," says Jane Gentry. "These accounts are essential for yacht brokers, and an integral part of the marine industry that is worth around £3 billion to the UK economy each year, according to BMF statistics."
The issue also extended to brokers repaying marine mortgages. In both instances, the FCA has agreed that, despite the confusion, yacht brokers do not need to be FCA accredited to do so.
"We took our members' concerns to the FCA and we have secured a ruling on the matter that will be a huge relief to every yacht broker in the business," concluded Gentry. "This is a great result and is testament to the skills and dedication that ABYA can deliver behind-the-scenes for its members."
A full transcript of the ruling from the FCA and an information pack that will help brokers set up these accounts if they ever encounter these problems with their own bank is available from the members' area of the ABYA website.