U.S. Bank Examiners Need Clarity on Money Transmitter Accounts: GAO
04 Dec 2019

U.S. financial regulators need to issue additional guidance for bank examiners charged with reviewing how lenders monitor accounts held for money transmitting businesses, the Government Accountability Office (GAO) said Tuesday. 

In a 79-page report on why banks have shed accounts for the firms in recent years, the GAO concluded that some federal examiners remain unclear on “how much due diligence is reasonable to expect banks to conduct for their money transmitter customers.” 

Federal examination procedures do not specify how examiners should review anti-money laundering procedures and conduct onsite visits linked to higher-risk bank accounts held for money transmitters, the GAO said. 

“From 2014 through 2016, 40 of 86 banks with money transmitter customers that responded to GAO’s survey indicated they terminated at least one money transmitter account for money-laundering-related reasons,” the office said. “Common reasons given for terminating accounts included the customer not providing information needed to satisfy the banks’ due diligence requirements under Bank Secrecy Act (BSA)/anti-money laundering (AML) regulations and that the cost of BSA/AML compliance made these customers unprofitable.” 

The lack of clarity has also contributed to so-called “de-risking”, or the practice by banks of limiting their services for entire classes of corporate customers in order to avoid potential regulatory trouble, the GAO said. 

The Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and National Credit Union Administration have all agreed to review whether they should update their guidance on examinations and related training as a result of the GAO’s findings.

Read the full report here

RiskScreen: Eliminating Financial Crime with Smart Technology

Advance your CPD minutes for this content, by signing up and using the CPD Wallet