Leaked Documents Show Dutch Rabobank Blocked Bitcoin for 'Ethical Reasons'

Rabobank, the Netherlands’ third-largest retail bank by market share, blocked its customers' transfers to bitcoin exchanges for 'ethical reasons', according to several first-hand customer reports and bank documents leaked to Dutch news sites.

When questioned about the blocks, Rabobank apparently told some customers there were “technical problems” with the transfer, but told others the bank’s own internal Ethics Commission had ruled to disallow bitcoin trading.

Dutch whistleblowing site Publeaks also published an internal Rabobank document first obtained by another website, Tweakers, that appeared to confirm it was the Ethics Commission who had advised its branches not to facilitate bitcoin trading for customers.

Tweakers reported the main reason behind the advice was the lack of government oversight for digital currencies, allowing them to be more easily used for criminal activities like money laundering, child pornography and drug smuggling.

The documents went on to recommend customers engaging in bitcoin trading be labeled as having a “higher risk profile” in general. While the bank did not specify the implications of such a profile, it likely means these customers would find it more difficult to obtain loans in the future and if loans were granted, possibly pay higher interest rates than other customers.

Rabobank denied the leaked report had anything to do with blocking bitcoin-related transactions, saying payment problems were related to technical issues after all. A bank spokesperson clarified the issue further by saying “facilitating trading” did not refer to individual customers seeking to buy bitcoin, but instead to the bank’s unwillingness to grant loans to businesspeople wanting to start bitcoin exchanges.

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The Ethics Commission’s advice was just that, the spokesperson said, and it was not binding upon local branches to follow. Rabobank’s structure is different to other large banking groups in that its network of local branches is actually the parent organization to its central authority. Branches have a higher degree of autonomy than those of other banks, and could decide for themselves whether to follow the Ethics Commission’s advice or not.

Should that advice ever become part of Rabobank’s list of standard regulations in the future, however, branches would be bound to follow it.

It’s actually not the first time Rabobank has shown an aversion to bitcoin-related activities. As far back as December 2012, when bitcoins traded for around $15 each and were still considered a niche hobby for technology enthusiasts, customers reported “strange errors” when trying to transfer money to bitcoin exchanges.

Jouke Hofman, co-founder of local exchange Bitonic.nl, posted in the bitcointalk forums at the time that Rabobank had previously worked with his company to develop a ‘fraud detection system’, but later revealed the bank was developing its own fraud detection system, which soon began blocking some transfers to Bitonic. Customers of other European banks, such as France’s Crédit Agricole and Germany’s Commerzbank, also reported blacklistings and frozen accounts.

Stories of major banks closing the accounts of bitcoin-related businesses and refusing transactions have since become more commonplace, with at least six banks in the US taking some form of action against bitcoin, including Capital One and IAFCU, and payment services companies like Dwolla shutting down their bitcoin operations.

Banks in several other countries have also engaged in some level of anti-bitcoin activity, such as Australia’s Commonwealth Bank, Canada’s Toronto-Dominion Bank and Royal Bank of Canada, Barclays in the UK and Sweden’s Swedbank.

Reasons were usually vague or not given, but the actions were often justified on ethics and fraud grounds. Commenters have scoffed at such rationales, however, pointing out that large banks including Barclays and Rabobank itself were penalized for their involvement in recent financial scandals such as Libor rate rigging.

Featured image: Wikimedia Commons