Sajid Javid on Tuesday told the home affairs committee that banks been instructed at the start of the year to close the accounts of “thousands” of people that the Home Office had wrongly identified as illegal migrants.
But he has now asked the banks to suspend the measures, amid fears people living in the UK legally may have been erroneously targeted.
“What I have asked officials to do is to contact those banks again and tell them not to go ahead with that until I am more comfortable that we have got it right,” he said.
Past immigration checks made by agencies including the DVLA, DWP and HMRC will also be checked for mistakes relating to people from Commonwealth Countries, he said.
It is unclear how many banks accounts, if any, may have been closed.
Mr Javid made the comments while being questioned on the Windrush scandal, which saw British citizens targeted with deportation or punitive measures after public services required they undergo immigration checks.
Commentators, however, warn that the impact could be broader.
A 2016 investigation found a margin for error of 10% in banking immigration checks – resulting from poor administration or inaccurate data, for example. Other campaigners have called the policy as a whole “inhumane”.
“No one should be placed at risk of destitution because of their immigration status,” Robin White, of campaign group No Borders in Banks, said.
“So called ‘illegal’ immigrants are created by economic hardship, unduly complicated legal processes and by the continued incompetence of the Home Office.”
The Home Office suspension is the latest backtrack on the hostile environment, a series of government policies that aim to make life difficult for people in the UK illegally by demanding they prove their immigration status when using services like the NHS, applying for passports or renting from a landlord.
Last week Home Office suspended a deal that required the NHS to share patient data with immigration authorities, and the Department for Education in April said schools would not be required to collect pupil nationality data.
Corey Stoughton, Advocacy Director at Liberty, welcomed Mr Javid’s move.
“The hostile environment means placing a border on every corner. It’s turning public services like hospitals or private actors like landlords and banks into border guards, wherever a person turns,” she told Sky News.
“What we’re starting to see is a growing realisation that this is the wrong approach.”
Appointed Home Secretary after Amber Rudd resigned over Windrush, Mr Javid disowned the hostile environment policy, and has instead adopted the term “compliant environment to describe government approaches toward migration.
A Home Office spokesperson said: “It is vital that the Compliant Environment protects vulnerable people and appropriate safeguards are built into the measures.
“However, after careful consideration we have decided to temporarily reduce the scope of the checks being carried out on bank accounts.
“It is right, in light of Windrush, that we review existing safeguards to ensure that those who are here lawfully are not inadvertently disadvantaged by measures put in place to tackle illegal migration.
“We remain committed to tackling illegal immigration and to encouraging compliance with our rules and laws.”