International perspectives on de-risking (Revista Gênero e Interdisciplinaridade)

Summary

• Regulatory divergence creates material and growing expenses in the global financial sector, taking up on average 5-10% of annual turnover.p.5
• KPMG's 2014 survey showed that 78% of compliance professionals at top global banks reported increases in AML compliance investments, with 22% indicating spending growth of 50% between 2011 and 2014.p.5
• In 2012, HSBC agreed to pay $1.9bn and entered into a 5-year deferred prosecution agreement with the US government following anti-money laundering control failures.p.5
• Bank de-risking in Syria has decreased the available cash for NPOs by at least 35% at any point, extending fund unavailability by 3-5 months.p.6
• In 2020, the Banque de France conducted 36,056 appointments under the account entitlement procedure, which included 28,923 for individuals.p.13
• India's biometric identity system Aadhaar registered over 1.2 billion citizens, enabling more than 470 million Indian adults to open a bank account between 2011 and 2017.p.14

Key insights

1. Over 70 documents published by central banks, regulators, and civic bodies reveal that most countries have only a partial understanding of the extent of bank account de-risking through data.p.3
2. Low profitability and high costs of compliance associated with small transaction sizes drive credit institutions to de-risk Money Service Businesses and Correspondent Banking Relationships.p.4
3. Regulatory compliance costs consume an average of between 5-10% of annual turnover in the global financial sector.p.5
4. De-risking moves transactions into less regulated or unregulated channels, hindering monitoring capabilities and raising money laundering risks.p.6
5. The FATF clarified that terminating entire classes of customers without evaluating individual risk mitigation measures violates its recommendations.p.8
6. The European Commission proposed requiring credit institutions to provide payment account services to payment and electronic money institutions, allowing refusals only in exceptional cases.p.10
7. Australia's government supported recommendations for major banks to collect de-risking data and implement transparency and fairness measures including 30 days notice.p.12
8. French law mandates that anyone residing in France or holding French nationality has the right to a bank account via a Bank of France direction mechanism.p.13
9. National digital identity initiatives like Sweden's BankID and India's Aadhaar serve as essential drivers for expanding financial inclusion.p.14