The issue of de-banking is a complex global issue. Over the past decade, the range of businesses affected by loss or limited access to banking services has widened. Money transfers (remittances), digital currency exchanges, nonprofit organizations (NPOs) and financial technology companies (FinTech) are disproportionately faced with bank account closures. Banking services in the Pacific region, previously activated by Australian banks, are also at risk. We understand that there are several drivers both nationally and internationally, including:
- business considerations, for example the cost-effectiveness of providing banking services to high-risk customers
- reputation risk
- uncertainty related to the business model of customers, especially emerging companies
- broader environmental, social and corporate considerations of institutions
- expectations of foreign correspondent banks vis-à-vis Australian institutions
- compliance with sanction requirements
- compliance with anti-money laundering and terrorist financing requirements.
The effect of removing legitimate and lawful financial services companies from banking may increase the risks of money laundering and terrorist financing and negatively impact the Australian economy. For this reason, AUSTRAC continues to discourage the indiscriminate and widespread closure of accounts across all financial services industries.
Like the banking industry, new and emerging financial services companies, money transfer companies and nonprofits facilitating transactions abroad and new payment models risk being exploited by criminals. Like the banking industry, these companies provide valuable services to communities in Australia and abroad and contribute to Australia’s economic prosperity. These companies vulnerable to exploitation should not automatically close their accounts just to avoid managing risk.
At the same time, the responsibility for managing the risks posed by criminals does not lie solely with the banks. AUSTRAC expects companies operating in these sensitive industries to understand and meet their anti-money laundering and anti-terrorist financing and other regulatory obligations. These sectors need to improve risk management and ensure that they have appropriate systems in place to help them identify, track and disrupt criminal exploitation of the financial sector. Such efforts strengthen and protect their own businesses and demonstrate a strong will and culture of compliance to the banks with which they seek to partner.
While the decision to close an account may remain a necessary risk control, AUSTRAC believes that with appropriate systems and processes in place, banks should be able to manage high-risk customers, including those who operate high-risk customers. money transfer services, digital currency exchanges, non-profit organizations. (NPO) and FinTech companies.
AUSTRAC expects banks and all regulated businesses to take a case-by-case approach to managing ML / FT risks. This expectation extends to the importance of continuing to assess the particular risks associated with their business customers in accordance with the risk-based approach. AUSTRAC also encourages banks to engage with businesses on actions they could take both immediately and in the longer term to meet banks’ internal risk standards.
Losing or limiting access to banking services can have a devastating impact on individuals and their businesses. Closing accounts in entire industrial sectors leads de-banked businesses to be less open about the nature of their business relationships with banks. This increases the difficulty of distinguishing lawful activity from illegal activity which can have significant impacts on law enforcement and our efforts to improve our capabilities and understanding. It also forces de-banked businesses to change financial institutions frequently, leading to banks having a less sophisticated understanding of the types and volume of transactions expected due to limited historical data. Unlike risk management and mitigation, these activities drive criminal activity underground and exacerbate the risks criminals pose to the Australian financial system and the community.
AUSTRAC remains committed to financial inclusion and will continue to contribute to broader government efforts, including the Board of Financial Regulators, to support universal access to financial services.