Surprise! Enforcement efforts against money laundering have unintended consequences.
Severe fines against large banks for violating anti-money laundering rules has led the banks to place a heavy focus on making sure their customers are legit. The result is a closing accounts of customers who have too high a risk of being shady. The unintended consequence is legitimate businesses and legitimate charities have difficulty finding a place to do their banking.
In a wonderful irony, articles at The Wall Street Journal on two successive days illustrate the tension. The articles leave you wondering in opposite directions. One article makes you think the banks ought to get serious about screening clients and shut down a bunch of accounts. The other article makes you wonder why these charities doing such wonderful work are getting all their accounts closed for no good reason.
First, charities finding themselves without bank accounts.
3/30 – Wall Street Journal – Cautious Banks Hinder Charity Financing / Account shutdowns and holdups of money transfers hinder ability to deliver aid to refugees – A charity that funds a school in Turkey which provides education to around 400 refugees from Syria had their account closed by JP Morgan for no stated reason. After an inquiry from the WSJ, the bank reversed their decision.
Another charity that operates a hospital in Syria had their accounts closed by BofA. After moving to Wells Fargo, their accounts were closed there. Staff at the hospital went four months without pay while the charity tried to figure how to get money into the country.
Authors have spoken to eight other charities who have had their accounts closed. Many others have had money transfers going into Syria, Turkey, or Lebanon held up for varying lengths of time.
Article mentions that banks are under pressure from the U.S. federal government to monitor their customers accounts and close those accounts which could be related to money laundering, whether related to drug running, terrorist financing, or other illegal activity.
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Surprise! Enforcement efforts against money laundering have unintended consequences.Read More »
Surprise! Enforcement efforts against money laundering have unintended consequences. Read More »
