By: Dan Frechtling, SVP of Marketing and Chief Product Officer
US Treasury Assistant Secretary for Terrorist Financing Daniel L. Glaser mixed sensitivity and matter-of-factness around the topic of de-risking while at global forum last Wednesday.
He began by defining de-risking. The Treasury Department sees it as “a situation in which a financial institution makes decisions to terminate, restrict, or deny services to broad classes of clients to avoid, rather than manage, risk.”
The meeting included Gulf nations and the discussion centered around correspondent banking and money service businesses. Yet the de-risking theme applies to other perceived high-risk businesses as well. He emphasized that risk management in general is ultimately a commercial decision, not a legal or regulatory one. It should be applied on a case-by-case basis rather than class-by-class. This echoes statements by the FDIC to the US House or Representatives and in published bulletins.
But regulators do have a stake in financial inclusion.
“Treasury is working with multiple international organizations, such as the World Bank, the Financial Action Task Force, and the Financial Stability Board to get greater clarity on the magnitude, breadth, and drivers of the problem, and the ability of financial institutions that have had accounts terminated to access other banking services. This effort is fairly advanced and we expect to have more data in the coming weeks.”
The remarks don’t signal anything new, but they suggest an ongoing effort. At that point, the sympathy ended as he suggested flexibility would have its limits.
“There have been quiet calls in some circles for scaling back regulations and tamping down enforcement. We are not going to loosen laws or lower global standards, and we are not going to walk away from supervising our financial institutions or enforcing our laws. We have worked hard to keep up with trends in financial innovation and financial crimes and we will continue to do so.”
Taken at his word, Glaser’s remarks show the importance of KYC and KYCC, especially business customer intelligence. Contact us at info@g2llc.com for more information on how you can better manage your KYC and KYCC programs.
