Money-laundering scandals spark new risk retrenchment
06 Sep 2019

Ever since the 2008 financial crisis, US financial misconduct fines have led the world. 

However, defenders of Europe’s more collegiate approach to tackling banks’ money-laundering shortcomings say US banks also lead the world for de-risking, shunning some of the globe’s poorest countries from access to the dollar system. 

Now a spate of money-laundering scandals is hardening the determination of European regulators to prove they are just as tough as their American equivalents. 

And it will have the same effect of turning banks further away from fragile nations, and even charities in their home markets, if the profit is not big enough. 

“I’m not risking my licence for a correspondent banking relationship that brings €100,000 in fees,” as one western European bank chief executive tells me.

HSBC holds an indication of what is coming. It withdrew from about 20 countries and 100 business lines under Stuart Gulliver’s leadership in the early and mid-2010s, partly because of money-laundering risks, after a $1.3 billion deferred prosecution agreement in the US. 

“The easiest way to avoid financial crime is not to engage in risky business,” comments Colin Bell, HSBC’s chief compliance officer. 

Other European banks are heading the same way. 

Deutsche Bank could be at least five years behind HSBC in terms of its hold on financial crime issues, says one prominent figure in London’s anti-money laundering (AML) community. 

But even as Deutsche becomes more reliant on business such as German trade finance, a €200 billion Danske Bank scandal in Estonia will discourage it from dealings with poorer countries. 

At a European Parliament hearing this year over Deutsche’s role as the main correspondent bank to Danske in Estonia, according to Reuters, its head of anti-financial crime Stephan Wilken said the bank had already cut correspondent banking relationships by 40% since 2016 and had entirely shut off Moldova, for example. That is only likely to get worse.

By Dominic O’Neill, Euromoney, 5 September 2019

Read more at Euromoney

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