ABA Banking Journal - November/December 2015 - (Page 69)
>>> ANTI-MONEY LAUNDERING
As large financial institutions shed riskier clients, are community
bankers prepared for those potential customers to come knocking?
BY EVAN SPARKS
op of mind among anti-money
laundering professionals is the
"de-risking" trend in which
financial institutions drop
entire categories of business
customers perceived to pose excess
risk, such as money transmitters or
third-party payment processors.
so would exceed the bank's risk
appetite, explains Wimpling, who cochairs the advisory board for the ABA/
ABA Money Laundering Enforcement
Conference, to be held Nov. 15-17
in Washington, D.C. But the surge
of interest creates some unique
headaches for smaller institutions.
But less noticeable is how de-risking
by larger financial institutions can
spread more risk throughout the
financial sector. After all, a money
services business needs access to
the financial system to survive; if it
gets turned away by a big bank, it will
try to find an easier access point.
While Wimpling is confident that his
bank has personnel and systems
that are sophisticated enough to
handle the business, some wary
MSBs, burned once by de-risking,
have obscured their true nature
when they open an account. As a
result, he explains, banks need to ask
detailed questions when businesses
open their accounts, maintain robust
monitoring systems and train frontline
staff thoroughly in what to expect.
Brian Wimpling, SVP and compliance
chief at the Tallahassee, Fla.-based
Capital City Bank, a $2.6 billion bank
with branches mainly in northern
Florida and southern Georgia, has
"absolutely" noticed an uptick in
inquiries from MSBs in the last
few years. "We get a big influx of
new business because we serve
that customer base," he explains.
"We've gotten calls from MSBs as
far away as Miami looking for us to
bank them because-I suppose-
they've lost their relationship with
a larger financial institution."
Capital City Bank doesn't serve MSBs
outside of its service areas; to do
"If someone's told you that they're
not going to be a check casher,
the last thing the teller should
see in the deposits is a big stack
of payroll checks coming in on
Monday morning," he says.
The risks ironically posed by
de-risking have top regulators
and law enforcement officials
scrambling to clarify that AML and
Bank Secrecy Act requirements
do not require banks to drop
whole classes of clients.
ABA VP Robert Rowe, who monitors
AML compliance issues, observes
that de-risking has been driven in
part by pressure from examiners.
"For banks to feel confident using a
risk-based AML approach, they must
see the same message in exams and
enforcement actions that they get
from speeches and pronouncements
by top officials," he says.
At last year's Money Laundering
Enforcement Conference, David
Cohen-at the time the Treasury
Department's top official for financial
crimes and terrorist financing-
acknowledged "concerns that there
may be a gap between regulatory risk
and illicit finance risk" but warned that
"to the extent that de-risking occurs,
it undermines important economic
and financial transparency objectives,
and reveals a misalignment between
regulatory risk and actual risk that serves
no one's interests." He and other officials
have pledged to work more closely with
the industry to refine the balance.
Wimpling's biggest concern is that in
responding to de-risking and looking
for new banks, MSBs can catch
community financial institutions
off-guard. "They may not have that
awareness that the risk is out there,"
he says. "If you don't know what you
don't know, that's the real risk."
aba.com/BankingJournal | ABA BANKING JOURNAL
Table of Contents for the Digital Edition of ABA Banking Journal - November/December 2015
A Conversation With the Comptroller
Cover Story Doing the Right Thing
Big Data and Predictive Analytics: A Big Deal, Indeed
Stress Testing: Feeling the Pressure?
ABA Compliance Center Inbox
Cybersecurity Self-Assessment Tool Helps Combat Risk
Real Estate Lending
Banker Recommended Reading
From the States
Corporate Social Responsibility
Index of Advertisers
ABA Banking Journal - November/December 2015