Finding Solutions to the “De-risking” Dilemma and Working Toward Financial Inclusion and Regulatory Clarity

As part of its 16 recommendations to combat money laundering and terrorist financing, the Financial Action Task Force (FATF) set out to establish the risk-based approach as the standard by which financial institutions create their own framework for assessing client risk and adapting their procedures to control those risks. Many argue that policy and guidance interpretations of the risk-based approach has led to unintended consequences, a phenomenon in the international financial community referred to in the pejorative as de-risking: the decision to restrict or withdraw financial services or to decline to establish a relationship to provide financial services in the first place.

Also referred to simply as the termination of business relationships or bank discontinuance, de-risking has left many legitimate businesses and economies with limited or no access to the global financial system, and in some cases has led to humanitarian crises.

Furthermore, the act of de-risking countermands the major goals set forth by FATF and other regulatory jurisdictions in that illicit moneys are no longer being tracked in the financial system as new alternative remittance systems are utilized.

ACAMS, in partnership with a number of prominent organizations such as the World Bank, is working to bring clarity to the de-risking environment and help illuminate the challenges and offer recommendations. The following are essential resources for all interested in a strong and inclusive world economy.