John Byrne
“Time won’t let me”[I]
The need to move quickly..
As the AML community grapples with increased fraud and financial crime during this global pandemic, previous regulatory challenges can become even more pronounced. Continuing problems that seem to be exacerbated at this time include de-risking or other limits to financial access, hurdles such as delays in funds transfers to humanitarian groups, and the chronically underbanked.
A couple of recent examples
In an April 22nd letter to the CEOs of Wells Fargo, JP Morgan Chase and Bank of America from 18 members of the House of Representatives, the members bemoaned the lack of access to financial institutions by a number of charitable organizations, pointing out that “U.S.-based charities, crowd-funding platforms, non-governmental organizations (NGOs), and non-profit organizations (NPOs) provide vital assistance to worthy causes both here in the U.S. and globally.” The letter referenced the Treasury Department’s 2018 National Terrorist Financing Risk Assessment and other government documents that discuss the risk-based approach to regulatory oversight. Collectively these documents argue that organizations who “make efforts to ensure transparency and demonstrate a comprehensive risk-based approach to combating terrorist financing” are actually less risky and should not be de-risked by banks.
The members called out the financial industry for discriminating against “LaunchGood,” a crowdfunding platform that focuses on serving the Muslim community. While we in the AML community have learned from our law enforcement partners that crowdfunding can be a source for moving illicit funds, the letter counters that categorization and says that LaunchGood is “widely respected” and driven by “American donors looking to support legitimate causes.” The authors argued that if an entity like LaunchGood is put on a high risk list with no opportunities to gain financial access, what chance do smaller charities have, especially in this time of crisis?
On the next day, our colleagues at the Charity and Security Network (CSN), whom we worked with on a June 2019 paper “Banking Nonprofit Organizations-The Way Forward, sent a letter to the FFIEC seeking swift movement to the non-profit section of the organization’s BSA/AML Manual. Citing the value of the April 15th updates to the manual that focus on the “risk-based approach” to examination oversight, CSN outlines the continued difficulties for charities seeking financial access, “hindering the rapid response demanded by situations such as COVID-19.”
While the AML community is well aware that the updates to the manual will come out in stages, CSN reminds the regulators that a letter with possible recommendations to the manual was originally sent to the FFIEC in October 2017 and their members still have examples of banks fearful of simply transferring funds needed to crisis zones. Two and a half years is incredibly long by anyone’s calendar, let alone organizations trying to help aid in human suffering around the world.
CSN believes that delays in changes to the manual “could very well contribute to breakdowns in the global response to COVID-19.”
CSN makes a timely request for movement and the corollary retraining of the examiners, making clear that changes to the manual that were previously recommended are consistent with recent public statements such as those mentioned above, and of course the July 2019 interagency statement on risk-focused examinations.
A time to act
While no one disputes the earlier commitment of the FFIEC representatives to hear the concerns of both the regulated (banks) and the humanitarian community, time does appear to be of the essence.
Let’s face it, these challenges need a multi-faceted approach; utilizing technology such as new digital platforms, continued guidance from international organizations such as FATF, continued strong statements of support for charities and their missions, and a realistic approach to regulatory oversight. With all of that and reasonable risk mitigation by our community, those that are in need can be served. This is needed now more than ever.
Time won’t let us wait any longer…
[i] Time Won’t Let Me” a 1966 song by The Outsiders and was covered by The Smithereens for the 1994 movie “Timecop.”