Diamond Traders Rejected by Banks Get EU Watchdog’s Attention
European regulators say some banks may be going too far in their efforts to comply with anti-money laundering rules, as client groups ranging from diamond traders to gambling operators and even embassy staff find themselves cut off.
According to the European Banking Authority, lenders in the region are potentially creating new financial risks by refusing to interact with a number of client groups. The Paris-based watchdog says the unintended consequences of such a business model include creating a shadow financial system that is harder to regulate, according to a Jan. 5 report.
“Unwarranted de-risking is a significant issue across the EU, with a potentially significant adverse impact on the EU financial system’s integrity and stability,” the EBA said.
Banks often lack the expertise or resources to gauge how risky individual customers are, according to the EBA. As a result, they’re erring on the side of caution to avoid the kind of reputational and financial damage that comes with scandal.
The industry is still grappling with the fallout from a series of dirty-money cases that have tainted it in recent years. Danske Bank A/S, which has admitted that much of around $230 billion in transactions was suspicious, could be facing penalties in the billions of dollars. Earlier this week, Swedbank AB’s former chief executive officer, Birgitte Bonnesen, was charged with serious fraud in connection with ongoing money-laundering probes into the Stockholm-based bank.
Read More: Swedbank’s Fired CEO Bonnesen May Face Prison After Fraud Charge
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