The US Financial Crimes Enforcement Network (FinCEN) has issued a stern warning to banks closing down money services businesses on a wholesale basis.

FInCEN emphasises the dangers posed to financial sector transparency of so-called de-banking, the closure or refusal to open accounts for an entire set of customers.

Global transparency
“Refusing financial services to an entire segment of the industry can lead to an overall reduction in financial sector transparency that is critical to making the sector resistant to the efforts of illicit actors,” the FinCEN statement says.

It points out that money transmitters are important to the global flow of remittances but are losing access to banking services.

Compliance costs
FinCEN surmises that they are losing the support of banks, in part as a result of concerns about regulatory scrutiny, the perceived risks presented by money services business accounts, and the costs and burdens associated with maintaining such accounts.

The network points out that MSBs play an important role in a transparent financial system, “particularly because they often provide financial services to people less likely to use traditional banking services and because of their prominent role in providing remittance services.”

Indiscriminate terminations
FinCEN believes it is important to reiterate the fact that banking organisations can serve the MSB industry while meeting their Bank Secrecy Act obligations.

Currently, there is concern that banks are indiscriminately terminating the accounts of all MSBs, or refusing to open accounts for any MSBs, thereby eliminating them as a category of customers.

Such a wholesale approach runs counter to the expectation that financial institutions can and should assess the risks of MSB’s on a case-by-case basis.

A full version of the FinCEN statement can be found here: http://www.fincen.gov/news_room/nr/pdf/20141110.pdf

Categories: Trade Based Financial crimes News