Illegal immigrants will have their bank accounts shut down in a new crackdown by the Home Office – who have been accused of “demonising” asylum seekers.

The Home Office announced it began sharing data with the financial sector on Thursday so it can refuse to open new bank accounts and close existing accounts of people who are in the UK illegally.

It said making it difficult for illegal migrants to access financial services is “an important tool to help deter illegal migration” as it prevents them from working illegally or using the benefits system.

Human rights charity Amnesty International UK accused the government of using private companies to impose its “hugely damaging, immigration policy”.

Steve Valdez-Symonds, Amnesty’s refugee and migrant rights director, told Sky News: “This is one of many ways the government has co-opted private bodies and civil society into its miserable, and often hugely damaging, immigration policy.

“It is part of an exercise in socially excluding and isolating a mass of people regardless of their individual circumstances – including where those culpable for why people are in these circumstances are human traffickers, other abusers and even the Home Office.

“It’s clear ministers do not care about who they harm or how because they’ve sold themselves to whipping up suspicion and even hate by constantly demonising migrants to excuse their woeful mismanagement of the immigration system.”

Banks will not be required to check customers’ documents for their migration status but the Home Office will share details of illegal migrants and banks can then check their personal current account holders against the list.

Anybody with outstanding immigration applications or appeals will not be affected, the government added.

The initiative is part of the government’s push to curb the number of migrants coming to the UK.

Immigration minister Robert Jenrick said: “Access to key banking services, including current accounts, is crucial in aiding those here unlawfully to gain a foothold in British society.

“As the prime minister has set out, we are committed to going further and faster to prevent the abuse of our laws and borders.

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“Illegal working causes untold harm to our communities, cheating honest workers of employment and defrauding the public purse.

“Only those known to be here unlawfully or those who have absconded from immigrational control will have their details shared, with robust safeguards in place to prevent wrongful account closures.”

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Banks will only close accounts when the Home Office has made further checks to ensure the person is still in the UK without permission to stay.

Prime Minister Rishi Sunak initially announced the plan in December 2022 to re-start data sharing as part of the government’s approach to tackling illegal working and immigration.

The government announced on Wednesday it plans to house more than 500 asylum seekers on a barge in Dorset, with the local council and Tory MP considering legal action to stop it from going ahead in the beauty spot.