BankingMSBPolitically Exposed PersonsRemittances

MSB bank accounts: the global retrenchment

By March 29, 2015 No Comments
global bank accounts

How can a money service business acquire a bank account? There is a wide-spread de-risking currently occurring amongst banks. In this article, we assess the range of phenomena that are occurring around the world, including how relevant regulators have responded and the varying provision of bank accounts around the world.

United States

Fincen have previously stated that banks should not reject all bank accounts:

Money services businesses (“MSBs”) including money transmitters important to the global flow of remittances, are losing access to banking services, which may in part be a result of concerns about regulatory scrutiny, the perceived risks presented by money services business accounts, and the costs and burdens associated with maintaining such accounts.

However, these statements have had little impact on the ability of MSBs to acquire such bank accounts in the United States.

United Kingdom

The most high profile retrenchment in the UK has been the closure of the bank account of a Somali remittance company, Dahabshil, by Barclays. According to the FT: “Barclays had tried to shut down the company’s account, which it has run for 15 years, over concerns that the money transmission sector was at risk of being used for money laundering and terrorist funding, and did not meet new regulatory requirements.” Barclays is the last major banking provider to service the Somali MSB corridor.

Australia

In Australia, according to Reuters in November 2014, “Almost 20 remittance firms sued Australia’s second biggest lender, Westpac Banking Corp, this month to prevent the lender from becoming the last of the country’s major banks to quit the business, arguing that this would cripple them.” Money Service Businesses in Australia will thus be unable to access bank accounts, potentailly leading to an increase in cash transit measures.

Causes and Solutions

Larger MSB’s have survived and still retain banking access because they have advanced compliance procedures. Smaller MSBs have lower profitability, poorer compliance measures, and not accurately screen for politically exposed person|politically exposed persons, [[sanctions]] and [[adverse media]].

Broader Context

It is not just money service businesses that are affected. Larger global banks are cutting back on international private banking operations. JPMorgan and several other banks decided to close accounts of foreign embassies and United Nations missions is creating a cash-flow pinch for diplomats in the U.S. with bills to pay and payrolls to meet. Seemingly, bank retrenchment is impacting all sectors, in the light of significant banking fines and problems with [[anti-terrorist financing]], [[sanctions]] violations and [[money laundering]] issues.

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