The Underbelly of AML De-Risking: Executing Case-by-Case Account Closure Decisions

Author: Iris Smith, CAMS-Audit

Regardless of a financial institution’s size, complexity and regulatory authority, each institution faces account closure decisions when the money laundering (ML) or terrorist financing (TF) risk of keeping a customer relationship outweighs the cost/benefit of the relationship, more recently referred to as ‘de-risking.’ Differences between financial institutions regarding the actual execution of account closures appear when you compare risk appetite between those institutions. What might be considered medium risk for one institution may be considered high risk for another.

While the concept of de-risking is centered on institutions who are ‘wholesale’ de-risking or getting rid of entire classes of customers because of risk, this paper will focus on the challenges that exist when financial institutions execute on a case-by-case basis.

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