By Samantha Sheen, AML Director Europe, ACAMS
26 May, 2016
On 24 May 2016, the UK Financial Conduct Authority (FCA) published “Drivers and Impacts of De-Risking” (Report), which was the result of an engagement made in 2015 with external consultants to research the nature and sale of de-risking in the UK. From this report, the FCA has concluded that de-risking is the result of a complex set of drivers and not solely driven by AML-related considerations.
The FCA has indicated in its announcement page on its website regarding the Report that while each organisation must establish its anti-financial crime (AFC) framework based on the nature and complexity of its particular business, “banks should not use AML as an excuse for closing accounts when they are closing them for other reasons”. The FCA has also drawn attention to the UK anti-competition legislation and that of the EU, noting that banks should be mindful of these requirements when deciding to terminate existing or decline new relationships.
Several of the Report’s overall findings reflect the views expressed by other organisations about the drivers behind perceived de-risking activities. These drivers include overall financial pressures, cost of compliance versus potential return from a business relationship, perceived increased AFC compliance risks posed by certain types of business such as fintech, charities and money service providers.
Following its review of the report’s findings, the FCA has expressed the view that effective money-laundering risk management need not result in wholesale de-risking.
However, the FCA’s response in relation to one area of the Report is of particular interest. With reference to its April 2016 Action Plan, the FCA has proposed that AFC compliance costs could be minimised through greater innovation. The FCA has expressly stated that it is committed to supporting such innovation. The FCA expressed its commitment to work with banks to lessen the adverse consequences of de-risking while also refraining from constraining the commercial freedom enjoyed by the banks.
The FCA has also reiterated comments originally made in its March 2016 feedback statement FS16/2 that it will continue to work with HM Treasury and the Joint Money Laundering Steering Group to ensure that the 4th EU AML Directive is transposed into law in a way which support the use of digital solutions for customer due diligence (CDD). This will include working with the Government Digital Service to understand how digital identification could be used within the financial sector.
Support for innovative technology to improve, accelerate and reduce the cost of AFC compliance will be the subject of greater research and promotion by the FCA.
The express acknowledgement by the FCA of the benefit and need for technical innovation around CDD is a welcome development, which will be well-received by both traditional and emerging financial sector businesses alike. While not the first jurisdiction to explore the benefits of digital identification, the growing adoption of digital financial services, FinTech and RegTech businesses and increasing cultural acceptance of the use of mobile technology to undertake financial activity makes this development both timely and essential.
Could we be seeing the start of the end of reams of passport photocopies and utility bills? We will all be watching with great interest.
*At the end of May 2016, ACAMS co-hosted a stakeholder dialogue with the World Bank on financial inclusion and de-risking. We will be posting a summary of the outcomes from this event shortly.
Further information and copy of both the Report and the Occasional Paper on financial exclusion can be found at www.fca.org.uk/news/fca-research-into-the-issue-of-derisking
For more information about the Government Digital Service (GDS), please see
For more information about RegTech, please see https://innovate.fca.org.uk/innovation-hub/regtech-programme