By Huw Jones
LONDON – Some European Union banks are shutting out asylum seekers and other types of customers in mishandled efforts to comply with anti-money laundering rules, the bloc’s banking watchdog said.
Banks have become far more nervous as regulators in the EU, the United States and elsewhere crack down on inadequate “know your customer” checks, prompting some people to complain that they are being unfairly locked out of the financial system.
The European Banking Authority (EBA) said on Wednesday that its research found that so-called de-risking by banks and payment firms takes place across the EU and affects asylum seekers and not-for-profit organisations in particular.
When de-risking, banks exclude some customers because their profile suggests potential money-laundering or terrorist financing risks which could damage their reputation.
“The EBA‘s findings suggest that de-risking has a detrimental impact on the achievement of the EU’s objectives, in particular in relation to fighting financial crime effectively and promoting financial inclusion, competition and stability in the single market,” the watchdog said in a statement.
The EBA said it has already issued guidance for national regulators and banks on how to manage money laundering risks properly. It will check on what steps national regulators are taking to tackle unwarranted de-risking and report back in 2023.
After a money laundering scandal at Denmark’s Danske Bank, the European Commission set out proposals last year to create an anti-money laundering authority along with other measures which the EBA said would go some way to ending unwarranted de-risking.
But the Commission could go further by clarifying in which situations an account with basic features should be rejected or closed, with a complaint mechanism for customers, the EBA said.