October 27, 2020

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Investigation of negative side effects against banks with money laundering rules

Investigation of negative side effects against banks with money laundering rules

“I certainly see the problem that the EBA is afraid of,” says Yvonne Willemsen, head of security at the Association of Banks (NVB), the Dutch industry association. “Since the regulations are quite complicated and we have to know a lot about customers, we are very strict on the doorstep. For some parties this means that they have great problems finding a bank.”

Pressure on banks and other financial institutions to fight money laundering has increased significantly. The rules in Europe have been tightened and the regulator in the Netherlands is also prosecuting banks. In the last few years there have been several interventions at banks, from a penalty order at Rabobank to criminal investigations at ABN Amro to a mega-settlement at ING.

Since then, the banks have invested significantly more in the departments that are supposed to fight financial misconduct. Thousands of additional employees were hired in the Netherlands alone. At the same time, banks are more likely to find that properly monitoring some customers is so tedious that they don’t understand the point.

Also in the Netherlands

“I know that banks are doing a much more critical review and that there are lists of risk groups,” Willemsen admits. According to her, this does not mean that entire customer groups in the Netherlands are excluded from the start. “Every single application is checked: can we reduce the risks for this applicant or not?”

The fact that it became clear last year that Rabobank is rejecting customers in professional football in advance because the risk of fraud and money laundering is too great is an exception, she says. “Yes, this is an exclusion indeed, but I haven’t heard that from other groups.”

Therefore Financieel Dagblad A tour of lawyers in the Netherlands shows that the problem is wider. Banks, for example, would be wary of boat brokers, car dealers, and watch sellers. Lawyers say the newspaper should be called flat by victims unable to go to a bank.

Victims can report

In order to gain a better understanding of why financial institutions are banning customers in advance instead of hiring and monitoring them, and to what extent this is happening, the EBA has been holding a consultation round since mid-June. Both financial institutions and victims can make their voices heard by the end of next week.

On this basis, the Authority will examine whether the current anti-money laundering and terrorist financing rules have undesirable side effects and whether or not they recommend changes.