[1] The great unbanking – Swingeing fines have made banks too risk-averse http://econ.st/2tCsI1L
[2] Rolling up the welcome mat – A crackdown on financial crime means global banks are derisking http://econ.st/2unVNwC
[3] Our sector is called by many names globally, from Financial Services for the Poor (http://bit.ly/2uNm8VM), Alternative Financial Services (http://bit.ly/2unYC0z), Financial Services for the Low-Income Consumer (http://bit.ly/2trPaGy) and other similar names. Although the sector is mainly compromised by NBFIs (Non-Banking Financial Institutions) both traditional brick & mortar and fintech firms, there are also Community Banks, Coop Banks, Rural Banks, Small Commercial Banks & Saving Banks that have as their mission to provide financial services for the poor.
[4] I suggest you read the following reports:
-
- Nov. 2015 report “Understanding Bank Derisking And Its Effects On Financial Inclusion” by Tracey Durner and Liat Shetret from the Global Center on Cooperative Security : http://bit.ly/2vOxZjc
- October 2015 World Bank Report on the G20 survey in de-risking activities in the remittance market: http://bit.ly/2uNPnYL
- December 2015 Report by Manuel Orozco, Laura Porras and Julia Yansura from the Inter-American Dialogue “Bank Account Closures: Current Trends and Implications for Family Remittances”: http://bit.ly/2uqcExa
- Blanket De-Risking of Money Services Businesses by Kristin Pullar, Vice President, Internal Audit AML at Western Union: http://files.acams.org/pdfs/2016/Blanket-De-Risking-of-Money-Service.pdf
[5] Banks are using risk-based approaches to discriminate, some of them avoiding cash based businesses, certain corridors, company size, years in business, type of services provided, etc.
[6] https://canadianmsb.org
[7] Sector-wide ‘sweep’: Money service firms say banks are giving them the boot http://bit.ly/2vkad2z
[8] MSBA: Money Service Business Association: http://www.msbassociation.org/
[9]Compliance/Regulatory Risk in Financial Activity (De-Risking) in the Americas http://bit.ly/2uV7mwm Riesgo de Cumplimiento/Regulatorio en la Actividad Financiera (“De-Risking”) en Las Américas http://bit.ly/2tsW529
[10]Bahamas, Barbados, Belice, Bolivia, Brasil, Chile, Costa Rica, Ecuador, El Salvador (Banco Central de Reserva & Superintendencia del Sistema Financiero), España, Guatemala, Haití, Honduras, Islas Caimán, Jamaica, México, Panamá, Paraguay, Perú, República Dominicana, Surinam, Trinidad y Tobago, Turcos y Caicos & Uruguay.
[11] The CGBS met in Antigua & Barbuda on 6 – 8 July 2017 (50 regulators from 17 jurisdictions) http://bit.ly/2u8LitB
[12] https://imtconferences.com/las-remesas-familiares-y-el-de-risking-en-mexico-por-salvador-velazquez/ The PDF of this article is here: http://bit.ly/MWC-dersksv
[13] El Economista, Oct 11, 2016 – “Cierre de cuentas es por discriminación, no por riesgo de lavado” http://bit.ly/2eGT6kn
[14] https://imtconferences.com/ciasefim-international-commission-money-transfer-associations/
[15] Africa: Bank de-risking hits money transfer firms http://bit.ly/2vWwq3Q
[16] AUKPI http://www.ukmta.org/Home.aspx
[17]De-risking and its implications on trade finance in Asia Pacific http://bit.ly/2uL34qf
[18] De-risking, renminbi, internationalization, and regional integration http://brook.gs/2uOJbgH
[19] The FSB was established in April 2009 but succeeded the Financial Stability Forum (FSF) founded in 1999. The G-20 has strengthen the role and functions of the FSB in its meetings in 2011 & 2012 and in 2013 the FSB established itself as a not-for-profit association under Swiss law with its seat in Basel, Switzerland.
[20] Guidance on correspondent banking services – http://www.fsb.org/2016/10/guidance-on-correspondent-banking-services/
[21] FSB Correspondent Banking Data Report: http://bit.ly/2uNJPgP
[22] The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action: http://bit.ly/2uNiJX4
[23] Act No. 273, also known as the “International Financial Center Regulatory Act” – More information can be found here: http://bit.ly/2ts7r6D
[24] Gobierno de Puerto Rico – Listado – Entidad Financiera Internacional al 6/16/2017: http://bit.ly/2eGn3Rq
[25] De-risking through education – Introduction to Standard Chartered Correspondent Banking Academy Initiative: http://bit.ly/2tEi8r6 . Note: The name implies that they are teaching local banks to de-risk… although what they are doing is teaching banks to manage risk, I suppose.
[26] FATF Dialogue with the Private Sector http://bit.ly/2uJ4gKN
[27] FATF chief talks de-risking dangers and correspondent banking: http://bit.ly/2wbHRUu
[28] Global Forum of Remittances, Investment & Development – https://www.ifad.org/web/events/gfrid2017
[29] http://bit.ly/2eGzahx
[30] A Bill & Melinda Gates Foundation-funded project, AFI was founded in 2008 to foster the development of financial inclusion policies in developing and emerging countries. The core 6 group members were Bank Indonesia (BI), Bank of Thailand (BOT), Central Bank of Kenya (CBK), Bangko Sentral ng Pilipinas (BSP), Superintendencia de Banca, Seguros (SBS) y AFP de Peru and Comisión Nacional Bancaria y de Valores (CNBV) of Mexico.
[31] Stemming the tide of De-Risking through Innovative Technologies and Partnerships – 2016 http://bit.ly/2valt0z
[32] KlickEx takes Kiwibank to court over it trying to close the money remitter’s accounts: http://bit.ly/2vzYnhE and you can hear Robert in this video interview: http://bit.ly/2gVHCdg
[33] RPT-NZ remittance company buying speedboats to move cash around Pacific: http://reut.rs/2vP2nKi
[34] You can check his presentations in IMTC: https://imtconferences.com/es/?wpfb_dl=203 and https://imtconferences.com/es/?wpfb_dl=228
[35] Opening Remarks by Mr Denton Rarawa http://bit.ly/2uOnpw1
[36] Regional session of The Digital Finance Future: Inclusive and Global Economic Growth series http://bit.ly/2tsTYf1
[37] The DFS Observatory At Columbia University: https://dfsobservatory.com/
[38]FATF on fintechs versus banks, virtual currencies, risk appetite and why regulation isn’t a rush job http://bit.ly/2eZjGFr
[39] Prospects for blockchain-based settlement frameworks http://bit.ly/2vfp2Cv published by ECLAC – Economic Commission for Latin America and the Caribbean – http://www.cepal.org/en/
[40] Information provided by Money Transfer consultant Salvador Velazquez, a partner in Mohr World Consulting Americas. https://mohr.world
[41]Financial inclusion is a term that is evolving. The “unbanked” are not necessarily financially excluded and GSMA’s MMU (Mobile Money for the Unbanked) programme “has been supporting mobile money services to provide convenient, safe and affordable financial services to the underserved, thereby increasing financial inclusion”. In many jurisdictions, the boundaries between Banks and Non-Banks is gradually changing.
[42] How Tech Giants Took Over the Mobile Payment Market http://bit.ly/2vYqirI
[43] Jack Ma, founder of Alibaba, Alipay, Ant Financial (buying Moneygram), coined the term in late 2016: “TechFin is to rebuild the [financial] system with technology. What we want to do is to solve the problem of a lack of inclusiveness.” Maybe Blake should have included in his article Mr. Ma’s companies too.
[44] Latest GSMA report highlights success of mobile money with over half a billion accounts worldwide http://bit.ly/2ucvZzW
How De-Risking is changing the face of Financial Services worldwide
In July 6th & 8th the Economist published two articles that, again, raised the de-risking threat discussion to new levels. The July 6th article was entitled “The great unbanking [1] – Swingeing fines have made banks too risk-averse – It is time to rethink anti-money-laundering rules” and the July 8th one: “Rolling up the welcome mat [2] – A crackdown on financial crime means global banks are derisking – Charities and poor migrants are among the hardest hit”. For us in the “low-income financial services provider’s sector” [3] the challenges, from regulatory pressures, rise in compliance costs and most of all, de-risking, are a survival issue.
This article is a broad view of de-risking, my opinions on some of the most recent developments that I have been reading, hearing and witnessing recently as we prepare for the “De-Risking Forum” on Nov 30 at IMTC WORLD 2017 in Miami. For detailed analysis on de-risking, its causes and the implications for FIs, you can find many great articles & documents online.[4]
You can read/download the PDF version from here
DE-RISKING IN NORTH AMERICA & EUROPE
De-risking keeps hitting hard Money Service Businesses, mostly International Money Transmitters and Foreign Exchange Services Providers and Cash-Dependent Financial Services Providers as well as fintech start-ups. The critical issue in both regions is that most of the larger commercial banks are headquartered there and not only they are de-risking themselves, but they are forcing their correspondent banks to de-risk local businesses. There are many news coming out and I will choose just a few to make my point:
DE-RISKING IN MEXICO AND THE AMERICAS
DE-RISKING IN ASIA AND AFRICA
CORRESPONDING BANKING
The Financial Stability Board (FSB) [21] The FSB is monitoring financial stability issues raised by FinTech as well as addressing the effect of de-risking, that “has negatively impacted correspondent banking. De-risking is not in line with the FATF Recommendations, and is a serious concern to the international community, including the FATF and the FATF-Style Regional Bodies. De-risking can result in financial exclusion, less transparency and greater exposure to money laundering and terrorist financing risks.”[22]
The FSB Correspondent Banking Data Report [21] published recently found that every region of the world has been affected by de-risking: Eastern Europe (-16%), Western Europe (-15%), Oceania (-12%) and the Americas (ex North America) (-8%), being the most affected. in 2016, the Caribbean and several regions within Oceania had high and generally increasing rates of decline of Correspondent Banking Relationships (CBRs), close or above 10%. The Economist published this chart using the FSB’s data.
The FSB report follows the International Monetary Fund’s June 2016 report “The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action” [22] which should be read, especially the notes concerning countries affected, categories of customers and business lines. In the report, the IMF reports that 75% of large global banks had withdrawn from CBRs.
MULTILATERAL EFFORTS TO FIND SOLUTIONS
DE-RISKING AND THE COURTS
DIGITAL FINANCIAL SERVICES
banking [as the cause} to the increasing shift toward informal finance”.
THE DE-RISKING SILVER LINING
The English poet John Milton coined the phrase “silver lining” in Comus: A Mask Presented at Ludlow Castle in 1634 and “There’s a silver lining to every cloud” is a proverb that I always have in my thoughts when I look for “pros” in different challenging situations. And the de-risking epidemic does have its “silver linings” that I want to point out:
The lobbying of the Banking Industry in a number of jurisdictions to keep MMOs & TechFin firms out of the space or forcing them to make deals with banks, has taken many forms and regulators & politicians have had to broker deals or side with one or another, but I don’t have yet any evidence of banks de-risking MMOs & TechFin firms. That would we a clash of giants.
Reference – Footnotes
[1] The great unbanking – Swingeing fines have made banks too risk-averse http://econ.st/2tCsI1L
[2] Rolling up the welcome mat – A crackdown on financial crime means global banks are derisking http://econ.st/2unVNwC
[3] Our sector is called by many names globally, from Financial Services for the Poor (http://bit.ly/2uNm8VM), Alternative Financial Services (http://bit.ly/2unYC0z), Financial Services for the Low-Income Consumer (http://bit.ly/2trPaGy) and other similar names. Although the sector is mainly compromised by NBFIs (Non-Banking Financial Institutions) both traditional brick & mortar and fintech firms, there are also Community Banks, Coop Banks, Rural Banks, Small Commercial Banks & Saving Banks that have as their mission to provide financial services for the poor.
[4] I suggest you read the following reports:
[5] Banks are using risk-based approaches to discriminate, some of them avoiding cash based businesses, certain corridors, company size, years in business, type of services provided, etc.
[6] https://canadianmsb.org
[7] Sector-wide ‘sweep’: Money service firms say banks are giving them the boot http://bit.ly/2vkad2z
[8] MSBA: Money Service Business Association: http://www.msbassociation.org/
[9]Compliance/Regulatory Risk in Financial Activity (De-Risking) in the Americas http://bit.ly/2uV7mwm Riesgo de Cumplimiento/Regulatorio en la Actividad Financiera (“De-Risking”) en Las Américas http://bit.ly/2tsW529
[10]Bahamas, Barbados, Belice, Bolivia, Brasil, Chile, Costa Rica, Ecuador, El Salvador (Banco Central de Reserva & Superintendencia del Sistema Financiero), España, Guatemala, Haití, Honduras, Islas Caimán, Jamaica, México, Panamá, Paraguay, Perú, República Dominicana, Surinam, Trinidad y Tobago, Turcos y Caicos & Uruguay.
[11] The CGBS met in Antigua & Barbuda on 6 – 8 July 2017 (50 regulators from 17 jurisdictions) http://bit.ly/2u8LitB
[12] https://imtconferences.com/las-remesas-familiares-y-el-de-risking-en-mexico-por-salvador-velazquez/ The PDF of this article is here: http://bit.ly/MWC-dersksv
[13] El Economista, Oct 11, 2016 – “Cierre de cuentas es por discriminación, no por riesgo de lavado” http://bit.ly/2eGT6kn
[14] https://imtconferences.com/ciasefim-international-commission-money-transfer-associations/
[15] Africa: Bank de-risking hits money transfer firms http://bit.ly/2vWwq3Q
[16] AUKPI http://www.ukmta.org/Home.aspx
[17]De-risking and its implications on trade finance in Asia Pacific http://bit.ly/2uL34qf
[18] De-risking, renminbi, internationalization, and regional integration http://brook.gs/2uOJbgH
[19] The FSB was established in April 2009 but succeeded the Financial Stability Forum (FSF) founded in 1999. The G-20 has strengthen the role and functions of the FSB in its meetings in 2011 & 2012 and in 2013 the FSB established itself as a not-for-profit association under Swiss law with its seat in Basel, Switzerland.
[20] Guidance on correspondent banking services – http://www.fsb.org/2016/10/guidance-on-correspondent-banking-services/
[21] FSB Correspondent Banking Data Report: http://bit.ly/2uNJPgP
[22] The Withdrawal of Correspondent Banking Relationships: A Case for Policy Action: http://bit.ly/2uNiJX4
[23] Act No. 273, also known as the “International Financial Center Regulatory Act” – More information can be found here: http://bit.ly/2ts7r6D
[24] Gobierno de Puerto Rico – Listado – Entidad Financiera Internacional al 6/16/2017: http://bit.ly/2eGn3Rq
[25] De-risking through education – Introduction to Standard Chartered Correspondent Banking Academy Initiative: http://bit.ly/2tEi8r6 . Note: The name implies that they are teaching local banks to de-risk… although what they are doing is teaching banks to manage risk, I suppose.
[26] FATF Dialogue with the Private Sector http://bit.ly/2uJ4gKN
[27] FATF chief talks de-risking dangers and correspondent banking: http://bit.ly/2wbHRUu
[28] Global Forum of Remittances, Investment & Development – https://www.ifad.org/web/events/gfrid2017
[29] http://bit.ly/2eGzahx
[30] A Bill & Melinda Gates Foundation-funded project, AFI was founded in 2008 to foster the development of financial inclusion policies in developing and emerging countries. The core 6 group members were Bank Indonesia (BI), Bank of Thailand (BOT), Central Bank of Kenya (CBK), Bangko Sentral ng Pilipinas (BSP), Superintendencia de Banca, Seguros (SBS) y AFP de Peru and Comisión Nacional Bancaria y de Valores (CNBV) of Mexico.
[31] Stemming the tide of De-Risking through Innovative Technologies and Partnerships – 2016 http://bit.ly/2valt0z
[32] KlickEx takes Kiwibank to court over it trying to close the money remitter’s accounts: http://bit.ly/2vzYnhE and you can hear Robert in this video interview: http://bit.ly/2gVHCdg
[33] RPT-NZ remittance company buying speedboats to move cash around Pacific: http://reut.rs/2vP2nKi
[34] You can check his presentations in IMTC: https://imtconferences.com/es/?wpfb_dl=203 and https://imtconferences.com/es/?wpfb_dl=228
[35] Opening Remarks by Mr Denton Rarawa http://bit.ly/2uOnpw1
[36] Regional session of The Digital Finance Future: Inclusive and Global Economic Growth series http://bit.ly/2tsTYf1
[37] The DFS Observatory At Columbia University: https://dfsobservatory.com/
[38]FATF on fintechs versus banks, virtual currencies, risk appetite and why regulation isn’t a rush job http://bit.ly/2eZjGFr
[39] Prospects for blockchain-based settlement frameworks http://bit.ly/2vfp2Cv published by ECLAC – Economic Commission for Latin America and the Caribbean – http://www.cepal.org/en/
[40] Information provided by Money Transfer consultant Salvador Velazquez, a partner in Mohr World Consulting Americas. https://mohr.world
[41]Financial inclusion is a term that is evolving. The “unbanked” are not necessarily financially excluded and GSMA’s MMU (Mobile Money for the Unbanked) programme “has been supporting mobile money services to provide convenient, safe and affordable financial services to the underserved, thereby increasing financial inclusion”. In many jurisdictions, the boundaries between Banks and Non-Banks is gradually changing.
[42] How Tech Giants Took Over the Mobile Payment Market http://bit.ly/2vYqirI
[43] Jack Ma, founder of Alibaba, Alipay, Ant Financial (buying Moneygram), coined the term in late 2016: “TechFin is to rebuild the [financial] system with technology. What we want to do is to solve the problem of a lack of inclusiveness.” Maybe Blake should have included in his article Mr. Ma’s companies too.
[44] Latest GSMA report highlights success of mobile money with over half a billion accounts worldwide http://bit.ly/2ucvZzW
Person of The Year – João Vitor Menin
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