KYC and Identity

A major spat has been orchestrated by campaigners for an independent Scotland. Aside from issues of national identity that may one day have to be resolved, the battleground chosen is gender identity, a subject that impinges directly on financial institutions, etc. and their ability to undertake effective Know Your Customer.

Nigel Morris-Cotterill

The news that the UK’s national government has said that it will use its powers to block legislation already passed in The Scottish Parliament looks like the consequence of a carefully orchestrated campaign by a limited number of Scottish MPs to try to force the issue of a second vote for independence from the UK.

To be clear, Scotland cannot survive as an independent nation. It survives only because it receives substantial sums from the UK’s central government. Scottish independence campaigner say that it would be self-sufficient if all North Sea Oil revenues were paid there but few analysts agree and even then the question of longevity of the oil fields would be in question.

Scotland would find itself a land of high taxes for the same reasons as Australia and New Zealand: lots of land, large complex borders, huge infrastructure costs and not a lot of people to pay for them.

Scotland has a Plan B: it want to join the EU.

One small problem: the EU is not at all sure that it wants it. Scotland is a money pit and the EU doesn’t need any more of those. Oh, and even if it was feasible, there is no guarantee that the process would be complete before the oil money slows.

Rebels looking for a cause

And so the campaigners needed a cause, something to rally Scots behind the cause that they have already said they don’t want.

It appears that the cause that was chosen was a Bill to provide for persons to change the record of their gender in official documents and more.

The Gender Recognition Reform (Scotland) Bill is here: https://www.parliament.scot/bills-and-laws/bills/gender-recognition-ref

The Bill is an amendment to the UK-Wide Gender Recognition Act, 2004 (here: https://www.legislation.gov.uk/ukpga/2004/7/contents ).

The 2004 Act places requirements on a person of ″either gender″ in order to obtain what amounts to a certificate that that person is to be considered to be of ″the acquired gender.″

But that certificate does not mean that the person’s legal gender, in for example a passport, is changed.

The Scottish Bill, which passed with an extraordinarily large majority in the Scottish Parliament, seeks to reduce the qualifying conditions and requirements and to allow for the change of gender in official documents. It does not, for example, adopt the Thai solution of allowing a transexual to be recorded as a ″third gender.″ In fact, the Scottish solution is to prioritise lifestyle, with or without medication or surgery.

The UK’s national objections to the Scottish Bill are on two bases: one is that, if made law, it will undermine the unity (and arguably sovereignty) of Westminster’s laws, specifically the Equality Act. The second is that the proposals for reducing the requirements put vulnerable people at risk.

Nicola Sturgeon’s plan to cause a deep rift with Westminster is working. While the British Government has taken the legal steps to prevent the Scottish Bill becoming law, it is probable that the case will end up in the courts. Even that will be cause for dispute because, as many people will be unaware, there is no single judicial system in the UK: If the case is begun in England and Wales (the largest jurisdiction) Scots will claim bias; if it’s begun in Scotland, it will, in any case, end up in the Supreme Court of the United Kingdom – which is in London. England.

All of that is fascinating knock-about stuff for politicians to enjoy.

In Westminster, there is broad accord that the Scottish Bill is unsatisfactory for a number of reasons. For example, it is widely said, including by the Leader of the Opposition, that 16 years of age is too young for a person to change his or her legal gender. In addition, Government’s objections are that it would affect legal rights to run single-sex clubs, associations and schools as well as rules on equal pay for men and women.

Scottish secretary Alister Jack told Miss Sturgeon "two different gender recognition schemes in the UK" risks creating "significant complications," including "allowing more fraudulent or bad faith applications".

And that’s where we come in.

Also, those in Scotland don't appear to have noticed that joining the EU would involve a loss of sovereignty far exceeding that which they claim is lost under the Union with Britain.

But that doesn’t stop the campaigners including the strident Scottish MPs who have seats in Westminster. They clamour for independence and demand that the UK approve a second referendum, the first having been lost. Nor does it stop the Scottish First Minister, Nicola Sturgeon, from lobbing vitriol across the border.

The majority of the support comes from the former Labour supporters, the miners and shipbuilders, who feel betrayed by the government in London, despite the massive injections of support into, particularly, southern Scotland where most are from. Out in the country, support for independence is thin.

The KYC problem

For the rest of us, the Scottish Bill, and the arguments against it, raise a number of issues that have been suppressed in the UK and are gradually raising their heads around the world. Gender equality, even for the four actual genders of male, female, hermaphrodite and neuter, is far from uniform across the world. Attitudes to sexual minorities and those who elect to "identify" as something else are utterly disparate.

The rights and wrongs and moral perspectives are not of my concern. I honestly don’t care if a man wears a frock nor do I care who anyone has sex with so long as both are of full legal age and capacity and that there is full willing and informed consent. And I positively approve of civil recognition of same-sex unions.

But I do care about misrepresentation and fraud and - most worrisome - the lack of clarity and certainty which are required for effective Know Your Customer. From a risk and compliance perspective I care about the difficulties that both gender changes and, worse, fluid genders cause in KYC. And all the legislation appears to omit something: the voluntary changes in gender of record are not expressed to be irreversible leading to the prospect of even more uncertainty in the future.

The Financial Crime Forum: Online will examine matters of national and gender identity and other issues in "KYC and Identity" on 15th February 2023.