Punishing Banks, Their Clients and Their Clients’ Clients
There is a lack of shared understanding about risk and related guidance on anti-money laundering/combatting the financing of terrorism (AML/CFT) and proliferation financing. Regulators sometimes send mixed signals about whether and how banks and other entities should manage their AML/CFT risk, with correspondingly simplistic risk assessment methodologies being applied by these entities. These factors, combined with the imposition of significant fines on some large banks for serious contraventions of AML/CFT and, particularly, of sanctions laws, have led banks to take regulatory risk far more seriously than criminal risk and led them to exit from firms, sectors and countries that cannot meet compliance standards and could become the source of future fines, monitorships or even prosecutions. The chapter examines the logic of de-risking and how policies and practices have developed with what consequences.