The damage of de-risking | AML, CFT, MONEYVAL

Recently MONEYVAL [*] published its annual report on anti-money laundering (AML) and combatting financing of terrorism (CFT). For the most part the publication is reporting on organisational matters.

De-risking
It is however interesting to see that the report informs the public on the serious damage AML-CFT measures are starting to cause in the world. In the introduction the president says:

If countries receive poor ratings in their mutual evaluations or are subject to widely-publicised money laundering scandals, global banks often decide to terminate business relationships with entire regions or classes of customers, rather than to manage possible money laundering or terrorist financing risks. In the last decade, this phenomenon called “de-risking” has nowhere occurred more frequently than in eastern Europe.

It shows that eastern Europe is having a lot of problems with AML-CFT legislation. They probably are not the only victims of this legislation. The summary informs the public that de-risking is very common nowadays:

In 2018, MONEYVAL also continued its series of roundtables on correspondent banking (“Re-connecting the de-risked”) with events in Frankfurt (Main) and London. De-risking occurs when financial institutions decide to avoid, rather than to manage, possible money laundering or terrorist financing risks, by terminating business relationships with entire regions or classes of customers. Although de-risking is not in line with the FATF standards and is a serious concern to the international community, the number of correspondent relationships by global banks with eastern European banks has recently decreased more than in any other region in the world.

De-risking is a consequence of AML-CFT legislation, that is also seen in the Netherlands. In the Netherlands obliged entities (not only banks) are ending commercial relationships with certain groups of customers. Certain groups of companies are faced with major difficulties to maintain a bank accounts. There are many examples available.

New discrimination
That AML-CFT results in de-risking, shows that the concepts behind AML-CFT are inadequate and lead to discriminatory practices. MONEYVAL bases its activities on the 2012 standards and the 2013 methodology by the Financial Action Task Force (FATF), a political pressure group. FATF develops these concepts without any independent critical examination.

Before damage is rising further for individuals, companies, organisations and states, it is very necessary that FATF’s concepts and MONEYVAL’s practices are independently examined by qualified scientists and that ways are found to call FATF and MONEYVAL to account for the damage that is caused by inadequate measures.

[*] MONEYVAL = Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism.

 

More information:


Addition 15 October 2019
AML en CFT will cause new discrimination through the algorithms used by obliged entities. Related: Digital dystopia: how algorithms punish the poor, Ed Pilkington in The Guardian, 14 October 2019; Computer says no: the people trapped in universal credit’s ‘black hole’, Robert Booth in The Guardian, 14 October 2019.

Over Ellen Timmer, advocaat ondernemingsrecht @Pellicaan

Verbonden aan Pellicaan Advocaten, http://www.pellicaan.nl/, kantoor Rotterdam, telefoon 088-6272287, fax 088-6272280, e-mail ellen.timmer@pellicaan.nl ||| Weblogs: algemeen: https://ellentimmer.com/ || modernisering ondernemingsrecht: http://flexbv.wordpress.com/
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