The Dangers Banks Face When Expanding Internationally

What's Next In Payments®
1:56 PM EDT January 2nd, 2013

When banks expand internationally in an attempt to expose themselves to new markets, they often expose themselves to new risk, too.

That’s the warning provided by Control Risks Group, a London-based risk analytics company that works with multinational banks and Fortune 500 companies to gauge the perils and rewards that wait institutions with international ambitions.

In an interview with American Banker, Angela Mancini, vice president and head of global client services for the Eastern Geo Market of the Americas, described the information her company can provide to banks.

“Clients can open the paper in the morning, read about what’s happened in Libya, Myanmar and Russia and then go to our site to find out what that means for them,” she said.

Some of the countries cited by Control Risks are obvious hotspots for financial turmoil. Libya, for example, is a high-risk, high-reward area, with many clients looking to enter its market “at the conclusion of some of the more severe security risks,” according to Mancini.

Russia is another country indicated as high-risk both in a general sense and for malware origination, and Myanmar presents an interesting study thanks to the U.S.’ shifting sanctions against the emerging market.

But some other more surprising names – say, the U.S. – also register high for some threat areas, such as the aforementioned Malware origin list. France is another country that rates more highly than one might expect, with Control Risks’ senior vice president of global risk analysis, Iain Donald, noting that the country “has a long history of government espionage against companies.”

Mancini warned that regulatory enforcement is a huge risk for banks seeking to expand their borders as well. She cited HSBC’s Mexican money laundering citation as an example, and cautioned that banks have to take precautions to meet international and domestic compliances.

“You have to be as compliant in further-flung places as you are in the U.S,” Mancini said. “There’s a real chance that if you’re not, the regulators will find out and you’ll have a massive reputational problem.”

To read more of Control Risks’ quotes in American Banker, click here.

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