Understanding Bank De-Risking and its Effects on Financial Inclusion: An exploratory study

Paper
Date Published: 
Nov 2015
Author: 
Durner, T. & Shetret, L.

How could the trend of bank de-risking affect vulnerable communities?

‘De-risking’ refers to financial institutions closing the accounts of clients perceived as high risk for money laundering or terrorist financing abuse. There is an observed trend toward de-risking of money service businesses, foreign embassies, nonprofit organizations, and correspondent banks, which has resulted in account closures in the US, the UK, and Australia.

Low profit, reputational concerns, and rising AML/CFT scrutiny contribute to de-risking, which can further isolate communities from the global financial system and undermine AML/CFT objectives. This paper explores the drivers of and responses to de-risking, highlights case studies of financial access, and provides recommendations to banks, regulators, and bank customers.

Type: 
Paper