Measures to diminish excessive de-risking practices by banks | AML, CFT, BIS

Excessive de-risking practices by banks, leading to the decline in correspondent banking relationships, is worrying the Bank for International Settlements (BIS). BIS decided to publish a document on AML/CFT supervision of correspondent banking.

Time has come that the AML/CFT principles have to be scrutinized in detail and that FATF and other responsible authorities are challenged to fundamentally change AML/CFT-legislation, before the damage and discrimination rises disproportionally.

The announcement by BIS:

Closing the loop: AML/CFT supervision of correspondent banking
Under the auspice of the Financial Stability Board’s four point action plan, several international organisations have taken measures to address the decline in correspondent banking relationships, including further examining the dimensions of the decline and implications for financial inclusion and financial stability; clarifying regulatory expectations; supporting domestic capacity-building in jurisdictions that are home to affected respondent banks; and strengthening tools for due diligence by correspondent banks.
Effective supervision is also crucial to successfully addressing some of the concerns which may lead to loss of relationships. This paper aims to contribute to the international dialogue by focusing on supervisory practices relating to correspondent banking activities. In view of the observed decline in correspondent banking relationships, practices to address excessive de-risking were a particular area of consideration. As a general matter, while the study found that legal and regulatory frameworks are consistent with international standards, their implementation is more variable and would benefit from greater alignment with the standards and convergence across jurisdictions.

 

More information:

 


Addition 25 September 2020
The discriminatory effects of anti-money laundering are illustrated by this article on the Deutsche Bank of 2018:

For many correspondent banks, the natural consequence of heightened KYC obligations, and the associated costs, has been strategic de-risking. It is inevitable that banks will evaluate the commercial value of a relationship against the cost of maintaining it – leading to some withdrawal from selected relationships and markets.

It shows that banks only want to do cherry-picking and are not willing to fulfill their social duties.

Also on the decline of correspondent banks: The Continuing Decline in International Correspondent Banking: Implications and Possible Solutions.

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/ ||| Motto: goede bedoelingen rechtvaardigen geen slechte regels
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