Global banks still suffering from lack of risk appetite
Banks are in the risk business. So what happens if regulators tell them to stop taking it?
A few of the globe’s top anti-money laundering watchdogs have conceded that their rules could stand to be a bit clearer - lest banks exit the risk business altogether.
“To some extent it’s not transparent,” Financial Action Task Force (FATF) president Je-Yoon Shin said recently at Sibos, a global payments and compliance conference in Singapore.
Shin was commenting on just exactly how much risk a bank can take on global payments according to the recommendations issued by FATF, an intergovernmental oversight body.
It is planning to issue a set of guidelines next June to clarify the first set of rules and help banks figure out how to calibrate an acceptable level of risk.
But in the wake of recent fines, the latest being nearly US$9 billion levied on BNP Paribas over sanctions violations, the current level of acceptable risk feels like zero for many banks.
We talk about risk-adjusted procedures and a risk-adjusted basis, but the perception out there is that there is zero tolerance
“We are living in a very particular moment in the [anti-money laundering] arena because we are over-complying sometimes,” Guillermo Horta, head of global financial crimes compliance in the Americas at Bank of America Merrill Lynch, said at the conference. “The fear of the banks against regulatory actions has driven us to a state where rather than just complying with the regulatory requirement, and making sure we have an effective process to manage risk, we are just trying to eliminate risk.”
