US regulator underlines TBML risks to banks and warns of dangers in de-banking

A US federal regulator has warned that de-banking as a response to Bank Secrecy Act (BSA) and anti-money laundering (AML) laws may simply shift illicit fund flows within the financial sector.

The Office of the Comptroller of the Currency (OCC) banks also underlined that banks remain exposed to the risk of trade-based money laundering (TBML).

BSA/AML risks rising

In its semiannual report on risk published in July, the OCC says that under the current legal framework, banks have significant responsibility for protecting the national security of the US financial system.

The report says BSA/AML risk is increasing. As a result, some banks have reevaluated client BSA/AML risk profiles and limited activities or closed accounts of certain customers.

Typically, reevaluations have led banks to terminate some of their foreign customer relationships because of concerns about the host country’s ability to supervise AML risk and doubts that the potential financial benefits of the relationship would offset the costs of managing the associated BSA/AML compliance risk.

Customer displacement

Displacement of customers from large banks may result in higher-risk customers moving to smaller and less sophisticated banks that, according to the OCC, could be potentially less experienced in managing the associated BSA/AML risks.

This displacement also may result in the financial exclusion of some customers from banking services, and transactions that would have taken place subject to regulatory oversight may be undertaken with less scrutiny in a non-regulated context.

TBML warning

Technological developments in enhanced delivery platforms for bank products may create new vulnerabilities to criminal activity according to the report.

It concluded that more traditional concerns – such as TBML and bulk cash smuggling – also continue to present risks to banks.



Categories: Trade Based Financial crimes News