Increasing regulatory pressures, rising financial crime compliance costs and escalating enforcement penalties are taking a toll on financial institutions. As banks become increasingly risk-averse, many are trending towards wholesale de-risking. But is that the best approach?
Wholesale de-risking has serious consequences. It hampers business innovation and long-term growth and jeopardizes individual livelihoods. Vulnerable and emerging populations are excluded from traditional financial systems as are many legitimate and small business customers who then cannot access financial services.
Additionally, wholesale de-risking weakens compliance infrastructures and inadvertently increases risks. It pushes funds to less regulated areas and shadow banking services, ultimately increasing potential anti-money laundering (AML) and combating the financing of terrorism (CFT) risks.
A better approach is to consider implementing a risk-based financial crime compliance strategy, one that is built on a strong foundation of technology, data and analytics. It allows for increased financial inclusion while managing AML and CFT risk tolerance. Risk-based compliance allows financial institutions to promote commerce and grow their business, while managing the risk of financial crimes.
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This document is provided solely for general informational purposes and does not represent legal advice. Readers should consult their attorneys, compliance departments and other professional advisors about any questions they may have as to the subject matter of this document.