The FCA has released the findings from the research report on Drivers & Impacts of De-risking, which was commissioned by the FCA in line with its objectives for 2016/17 and its long-standing program of work on anti-money laundering (AML). ‘De-risking’ is when banks’ concerns about the money laundering and terrorist financing risks posed by certain types of customer result in them withdrawing or failing to offer banking facilities to customers in greater volumes than before.
What the report demonstrates is that de-risking is the result of a complex set of drivers. The report notes that some potential pathways towards mitigating this issue may lie in balancing costs and risks between banks and high risk sectors, and a better developed understanding of how to measure money laundering and terrorist financing risk on a case by case basis.
The FCA stressed that the outcomes it seeks are that the UK financial system is a hostile sector for money launderers but that the unintended consequences of AML regulation are also minimised. Additionally, the FCA stated that it would explore ways in which technology solutions can help to deliver effective and proportionate AML outcomes, suggesting innovation may hold the key to reducing the costs of AML compliance for banks.
In addition to this, the FCA confirmed it will continue to work with the banking industry to lessen the damaging effects of de-risking without constraining banks’ commercial freedom, by, for example, improving the way in which firms identify money laundering risk and taking steps to foster innovation and reduce costs for AML compliance.