Bankers and regulators apparently remained at odds with one another over the issue of de-risking at a recent American Bankers Association (ABA) conference in Washington.

But there also seems to be a growing recognition that the process of de-risking may well increasing risks across the financial system.

Bankers’ view
The rhetoric of bankers and regulators at the ABA’s Money Laundering Enforcement Conference was perhaps predictable.

Bankers say they are facing tough scrutiny from regulators focused on compliance not to deal with businesses perceived as high risk while, sometimes the same, regulators are urging banks to keep those accounts open.

“We are kind of in a Ping-Pong match between financial inclusion and avoiding regulatory scrutiny and we are the ball,” managing director for financial crimes enforcement at JP Morgan Chase, Pamela Dearden told the mid-November conference.

Regulators’ view
Regulators such as the director of the US Treasury’s Financial Crimes Enforcement Network, Jennifer Shasky Calvery, disagree. She told delegates that banks should take a risk-based approach to assessing client relations and not embark on de-risking strategies.

The US Department of Treasury’s undersecretary for terrorism and financial intelligence, David Cohen, said his department is working to stop the practice of de-risking by banks.

Concerns
While these tensions between bankers and regulators look set to continue, there appears to be more agreement about the emerging dangers to the financial system of the de-risking process.

Executive vice president at Wells Fargo, James Richards, expressed concerns about the process.

Shared views
“The ironic result of de-risking is re-risking…you are just spreading it…you are sending them to banks that probably can’t handle it,” he told delegates.

In this context, the banker appears in agreement with the Financial Action Task Force which last month said de-risking would introduce risk and opacity into the global financial system by forcing individuals and entities into less regulated or unregulated channels.

Categories: Trade Based Financial crimes News