Fitch: AML Shortcomings Impact Bank Credit Ratings

As part of a broader look at environmental, social and governance factors on credit scores, Fitch Group Inc. noted that shortcomings in financial crimes and anti-money laundering (AML) controls are more likely to impact the credit rating of a bank than non-financial factors. Categories examined encompassed labor relations, management strategy and energy management, among other elements, The Wall Street Journal reported.

Monsur Hussain, a senior director in Fitch’s financial institutions group, told the outlet, “Financial crimes compliance lapses can be serious, material and can drive credit ratings.” At the same time, he pointed out that controls for AML are becoming more prominent in credit ratings, as regulators worldwide are clamping down on banks that don’t have strong controls. “We see a pattern of supervisory activity and muscular enforcement in Western Europe and in Asia,” Hussain continued.

The paper pointed out that the ratings agency reduced Swedbank AB’s outlook as the bank grapples with a crisis due to potential ties to Danske Bank’s money laundering scandal. As the rationale for its decision, the company pointed to uncertainty surrounding the reputation of the bank, along with the possibility of “capital-depleting fines.” Danske and Swedbank representatives declined to comment.

In other recent AML news, news surfaced in March that the European Commission vowed to make a new list of countries that present a money laundering risk by the summer, as it doubles down on its efforts to combat financial crimes. According to a report in the Financial Times, Vera Jourova, EU commissioner for justice, noted that the Commission will meet with the government to handle any issues as related to creating the blacklist of countries over terrorist financing and money laundering.