The Financial Conduct Authority (FCA), the City regulator in the UK, has issued a warning to banks over their practices of denying business accounts to sex workers. The FCA has determined that this lack of access to financial services can lead to “significant harm” for individuals in the adult entertainment industry.

While banks claim to offer accounts to the adult entertainment sector theoretically, the FCA found that in practice, many accounts were being denied or shut down. Often, lenders cited financial crime concerns or reputational risk as reasons for the closure, despite sex work being legal in the UK (excluding Northern Ireland).

A recent FCA roundtable meeting revealed that individuals in the adult entertainment industry, which encompasses various activities, including stripping, pornography, escort services, and prostitution, face serious challenges accessing financial services. This lack of access forces them to rely on cash or personal bank accounts, putting them at risk of blackmail and financial instability.

The FCA heard that family members of sex workers were also experiencing account closures, demonstrating the far-reaching impact of these discriminatory practices.

While some banks argued that balancing financial crime regulations with financial inclusion was difficult, the FCA insists that controls may need to be “recalibrated” to avoid unintentionally excluding individuals from the adult entertainment industry who meet account opening criteria.

The FCA is now urging lenders to establish a clear and comprehensive definition of reputational risk to guide account closure decisions. This move aims to address the issue of banks unfairly discriminating against sex workers.

Dr. Raven Bowen, CEO of National Ugly Mugs, a support organization for sex workers, welcomed the FCA’s intervention.

This is the first time the FCA has provided detailed guidance regarding the banking practices toward the adult entertainment industry. UK Finance, the trade association for banking and financial services, has previously said each bank would handle this issue based on their individual risk appetite.

“We recognise some sectors experience greater challenges in accessing banking services,” said a UK Finance spokesperson. “We are continuing to work with regulators, our members and relevant trade bodies to facilitate improved access to banking. If an account is closed, or an application refused, this only happens after extensive review and investigation. The main reason for this happening is dealing with financial crime concerns and banks have to follow strict regulations in this area.”

While banking the proceeds of sex work is not a criminal offense in the UK, the legal parameters surrounding related activities are narrow. This makes it challenging for private companies like banks to assess potential clients from this industry.

This situation highlights the lack of specific regulators for sex workers and the adult entertainment industry, which can lead to discriminatory practices by financial institutions. The FCA’s intervention is a step towards promoting financial inclusion and fair treatment for individuals in this sector.