Compliance: Start from a place of ‘yes’

Compliance: GAO conducts review of ‘de-risking’

May 17, 2021

The Anti-Money Laundering Act of 2020 requires the Government Accountability Office (GAO) to conduct a review of “de-risking” practices in financial services. The U.S. State Department defines de-risking as the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk.

The legislation states that, “the financial exclusion caused by de-risking can ultimately drive money into less transparent, shadow channels through the carrying of cash or use of unlicensed or unregistered money service remitters, thus reducing transparency and traceability, which are critical for financial integrity and can increase the risk of money falling into the wrong hands.”

It requires the Comptroller General to conduct an analysis on financial de-risking and submit a report to Congress by Jan. 1, 2022.

The analysis will:

  • Rely substantially on information obtained through prior de-risking analysis;
  • Consider the many drivers of de-risking, including profitability, reputational risk, lower risk appetites of financial institutions, regulatory burden, and unclear expectations; and
  • Identify options for financial institutions handling transactions or accounts for high-risk categories of clients and for minimizing the negative effects on such individuals and entities without compromising the effectiveness of BSA/AML requirements.

The Treasury will review BSA regulations, guidance and examination standards as they relate to de-risking and submit a report to Congress with proposed regulatory changes and legislative recommendations, also before Jan. 1, 2022.

Additional details on the GAO’s review can be found on CUNA’s CompBlog.

CUNA compliance staff previously looked into the “no less than 16 reviews, studies, assessments, and analysis” covering a wide range of BSA-related challenges that will come with implementation of the Anti-Money Laundering Act.