Recent News about De-Risking, Financial Exclusion and Bank Discontinuance

On November 11th, as part of IMTC WORLD 2016 we will be having a “DE-RISKING & BANK DISCONTINUANCE FORUM” to discuss the impact of this practice in the Money Transfer, Remittance and Payment Industry as well as the U.S. depository institutions termination of correspondent accounts of foreign financial institutions (FFIs) as well as some US Banks forcing local bank account closures by their corresponding banks in many countries in the world.

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Commonwealth’s De-Risking Meeting in London

As we informed all our special Friday Newsletter to subscribers in the UK, the Commonwealth Secretariat invited the International Money Transfer & Payments Industry to the “Disconnecting from Global Finance: A Conversation on De-Risking” meeting that was programmed this past Thursday, August 10th at Marlborough House in London. The meeting was called following the release of the Commonwealth’s report “Disconnecting from Global Finance: The Impact of AML/CFT Regulations in Commonwealth Developing Countries”. Passions ran high at the meeting as money transfer businesses and smaller financial institutions complained about the “detrimental” decline in international banking for many businesses and individuals.

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The Money Services Banking Crisis

To show how critical MSBs are to the functioning of the U.S. financial system, a 2013 Federal Deposit Insurance Corp. survey found 9.6 million U.S. households did not have bank accounts and 24.8 million households — 20 percent of the U.S. population — were underbanked, meaning they had bank accounts but also used alternative financial services outside of the banking system

Today, MSBs worldwide are caught in a banking crisis showing no signs of relenting. Based on real and imagined enforcement risks, most banks have categorically decided against providing accounts to MSBs, while others have been ordered by regulators to stop serving MSBs. This process of “de-risking,” by which banks terminate relationships with “high-risk” customers, has been brutal for the MSB industry and resulted in unforeseen consequences, including:

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The US CSBS & the MTRA Report on the State of MSBs Regulation & Supervision

The Conference of State Bank Supervisors (CSBS) and the Money Transmitter Regulators Association (MTRA) released an important report on the state of the industry that is a must read for anyone in the industry and a report that all US Money Transmitters should be sending to their banks. The report is entitled “The state of state money services businesses regulation & supervision” and it examines the non-bank financial sector in the US and the bank discontinuance and de-risking challenges the industry faces. But the main objective is to let the banks know of the strict regulations and close supervision the state regulators have on all licensed MSBs.

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Our industry, our image, our trade groups…

As I leave Barcelona after IMTC EMEA 2016 this past May 18-20 and I reflect on the industry, I can’t help but feel proud of the work we do at IMTC and the people we serve. Even talking with long-time industry warriors who are tired of the increasing complexity of the sector, I am a positive person and I can’t help but look back on where we started, around 30-35 years ago, and where we are now. Yes, we face many problems: bank discontinuance, regulatory inconsistency, a somewhat tainted image, weak trade groups, just to name a few. But we are a strong and growing sector with new products and services, new client sectors and technology developments that are impressive. Let’s take a partial look at ourselves…

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The Best Bank De-Risking Metaphor

In the past IMTC BRASIL 2016 in Sao Paulo, Leonardo Costa made a presentation available in our Download Section entitled Nueva Guia GAFI Prestadores Servicios Transferencia Dinero Valores about the FATF – GAFI February 2016 document on the GUIDANCE FOR A RISK-BASED APPROACH for MONEY OR VALUE TRANSFER SERVICES. The Guidance in Page 46 (#125) urges the Banks to “not resort…

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MONEY TRANSFER COMPANIES WIN A MATCH AGAINST BANKS IN BRUSSELS

The Spanish Courts petitioned the European Tribunal for a guidance to clarify Bank Account Closure Cases and the presumption of remittances being high risk

Our IMTC speaker and colleague Antonio Selas from the firm Cremades & Calvo Sotelo in Madrid has been preventing Banks from closing bank accounts of MTOs in Spain by taking to court the banks and convincing judges that Banks are discriminating against their competitors and that their “remittances are high risk” argument has no factual evidence. We met Antonio Selas in IMTC EMEA 2015 in Istanbul and he came to Miami and made a presentation in IMTC WORLD 2015 entitled “Bank Account Closures Are Against the Law“.

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FATF-GAFI GUIDANCE – A Risk-Based Approach for Money or Value Transfer Services

The timing could not have been better. FATF just published – February 2016, a report that all Compliance Officers of this industry must read, entitled Guidance for a Risk-Based Approach for Money or Value Transfer Services (SummaryFull Report (69 pages). I want to highlight three statements in the presentation of the report:

  • The risk-based approach, the cornerstone of the FATF Standards, requires that measures to combat ML/TF are commensurate with the risks. Such measures should not necessarily result into the categorization of all MVTS providers as inherently high-risk.
  • The overall risks and threats are influenced by the extent and quality of regulatory and supervisory framework, as well as the implementation of risk-based controls and mitigating measures by each MVTS provider.
  • While this Guidance is applicable to the entire MTVS sector (both banking and non-banking institutions offering MVTS); it is primarily intended for non-banking MVTS providers.
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