Recently, a study was conducted by the US Government Accountability Office (GAO) regarding residents and businesses along the Southwest border of the United States that were experiencing difficulties accessing banking services in the area. The GAO was asked to investigate this issue in order to determine if it could be attributed to branch closures or “derisking” which is a practice whereby banks limit certain services or end their relationships with customers to, among other things, avoid perceived regulatory concerns about facilitating money laundering.
The Southwest Border region is notorious for its high volume of cash and cross-border transactions leading it to be a high risk area for money laundering. As a result, banks and other financial institutions in this region are finding it difficult to properly comply with the Bank Secrecy Act (BSA) and other anti-money laundering (AML) regulations because more serious account monitoring and probing of suspicious activity is necessary. The GAO found that the average amount of suspicious activity reports filed in 2016 in the Southwest border counties was 273 in comparison to 110 in high risk counties outside this region.
The GAO also found that, between 2014 and 2016, approximately 80 percent of Southwest border banks either closed accounts that had risks related to BSA/AML or did not even offer accounts to customers that were considered high risk because this would have resulted in drawing more regulatory attention.
In the Report released by the GAO last week, it was recommended that by conducting retrospective reviews of BSA regulations and how banks are influenced by these regulations when determining whether or not to provide services, FinCEN and the federal banking regulators could focus on the main concerns of money laundering and terrorist financing more easily. These reviews would demonstrate how banks can improve their compliance systems without resorting to derisking or closing methods.
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