On 25 April, the US Treasury says that this if the first of its kind, and examines the phenomenon of financial institutions de-risking and its causes, and it identifies those greatest impacted. It also offers recommended policy options to combat it. It explains that de-risking occurs when financial institutions terminate or restrict business relationships indiscriminately with broad categories of customers rather than analysing and managing the risk of those customers. It is said that the strategy reflects the Biden-Harris Administration’s priority to shape a safer, more transparent, and more accessible financial system, while at the same time maintaining a robust framework to protect the US financial system from illicit actors and bolstering national security. The US Treasury has issued a fact sheet which summarises key findings and policy recommendations to address the issue of de-risking, which refers to financial institutions terminating or restricting business relationships indiscriminately with broad categories of customers rather than analysing and managing the specific risks associated with those customers. Unsurprisingly, it was found that profitability is the primary factor (though not alone) in financial institutions’ de-risking decisions. Those most affected are –
- Small and medium-size Money Service Businesses (MSB) that offer money transmitting services;
- Non-Profit Organizations (NPO) operating abroad in high-risk jurisdictions; and
- Foreign financial institutions with low correspondent banking transaction volumes, particularly those operating in financial environments characterised by high AML/CFT risks
https://home.treasury.gov/system/files/136/Treasury_AMLA_23_508.pdf
https://home.treasury.gov/news/press-releases/jy1438
https://home.treasury.gov/news/press-releases/jy1439
https://www.buymeacoffee.com/KoIvM842y
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