What is derisking?
Many banks claim that they turn down MSBs for accounts and other banking services because they lack adequate anti-money laundering procedures and controls. While this may be true in some cases, this is not the case across the board. We believe this is a one-dimensional viewpoint, and fails to take into consideration the actual facts.
It is an approach that has even been given a name by regulators – ‘derisking’. The concept is getting some public and political attention. There is a concern that this will remove services for those that are badly served by the banks. So for example temporary workers that want to send part of their salary back home to a foreign country.
Why are MSBs so important? Click here for more information.
Ultimately the banks will say that no one can tell them who to provide services to. Even Government officials will say that it is a commercial decision.
In our opinion third party cheque cashing is in itself a low risk MSB activity, and far less risky than some other financial transactions. There are processes in place to reduce the risk of other money services.
For more information about how MSBs are regulated click here.
When the UK Government published a risk assessment of money laundering it placed MSBs behind banks, lawyers and accountants. This was in the main because of the work carried out by firms to tackle the risk of money lending.
It is important that banks take a more sophisticated judgement when it comes to implementing their risk based approach.