In recent years, US authorities have increased their scrutiny of financial institutions’ anti-money laundering (AML) controls. In light of this development, banks and other institutions have begun to reassess perceived or actual AML risk across their operation.

The issue of de-risking is nothing new. In fact, FinCEN, the United States Treasury’s Financial Crimes Enforcement Network, issued advisories a decade ago when banks began to cut ties with money services businesses, or MSBs. The thinking then – as it is now – is that relationships with perceived risk could subject them to heightened regulatory scrutiny.Such moves appear to be part of a growing trend as many global banks scale back private banking operations, correspondent relationships, sell business lines, or sever ties with customers such as MSBs. Interestingly, other banks are seizing on this opportunity, by taking on more risk and complexity, by increasing investment banking and overseas trading activities, for example.

The notion of how institutions address risk comes on the heels of the Federal Deposit Insurance Corporation’s call for a measured approach to managing such relationships earlier this year. In some respects, it represents a departure from the move by banks to ‘de-risk’ in their operations. De-risking – eliminating or significantly limiting – business lines, products, geographies, and/or clients that pose an increased risk to AML-compliance efforts may seem prudent. However, it may also pose growth challenges for financial institutions.

Jul-Sep 2015 Issue