Regulators Clarify KYC Rules To Push U.S. Banks To Work Cross-Border

The Office of the Comptroller of the Currency — the top regulator for national banks — is sending out the message that U.S. banks ought not flee ties to foreign banks for fear of accidentally getting caught up in money laundering.

The message follows a four-page memo sent to banks last month that warned that lenders and customers abroad are hurt when U.S. banks go cold on foreign funds.

“Customers that cannot make alternative banking arrangements elsewhere may effectively be cut off from the regulated financial system altogether,” according to the “supervision tips” memo obtained by Reuters.

The move comes as policy makers are concerned about the wholesale ejection of a large swatch of consumers from the U.S. financial system by banks with outsized concerns about being penalized over money laundering violations.

Difficulties are particularly extreme for some sets of foreign nationals — customers from Yemen and Syria, for example, have a particularly hard time keeping accounts, and banks have ended such relationships, according to a senior compliance officer at a major U.S. bank.

JPMorgan Chase & Co stopped doing business with 18,000 customers in 2015. It also terminated relationships with 500 foreign partner banks, CEO Jamie Dimon told investors in a letter last year.

AML laws are geared toward stopping terrorists and other criminal groups from using U.S. banks as swapping points for their ill-gotten gains. This means banks must file a “suspicious activity report” when they encounter a transaction that could be criminal — like a series of small-dollar transfers.

That may stop terrorists, but it also stops a lot of charitable giving and international remittances.

More Somalis live in Minnesota than anywhere else in the United States — but sending money through a bank back to relatives in Somalia can be challenging.

Regulators, however, seem to be indicating that U.S. banks are not responsible for the partners of their partners abroad.

“There is no general requirement to know your customers’ customer,” Thomas Curry, the OCC chief, said in September.

The OCC conveyed that message to examiners in a January conference call, as well as the “tips” memo.

A spokesman for the OCC declined to comment on the examiner phone call or the “supervision tips” sheet.


Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 AML/KYC Tracker provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

Click to comment


To Top