The De-Risking Dilemma For Financial Institutions

Alerts / July 11, 2016

In the environment of increasingly aggressive regulatory and criminal enforcement of anti-money laundering (AML) violations, concerns about de-risking — when financial institutions close accounts or restrict access to new clients because of high AML or counterterrorist financing (CFT) risks — have risen to the fore. Regulators and policy groups are concerned that “wholesale” de-risking restricts financial inclusion and may violate competition laws. It goes without saying that financial institutions must appropriately manage their AML risks in light of the increased enforcement and civil liability exposure. Nevertheless, in lieu of wholesale exclusion of large segments of commerce, financial institutions should develop enhanced diligence protocols during the customer account opening process and monitor account activity to manage these risks effectively. By doing so, financial institutions can ensure continued banking access to the communities these alternative money service businesses (MSBs) serve.

Read the rest of Lauren Resnick and Margaret Hirce's article in Law360

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