A set of compliance best practices standardizing how money-services businesses can protect themselves against financial crimes could have an additional knock-on effect: preventing banks from dropping them as customers.
The primary goal of the new document from a group of industry associations, including the Electronic Transactions Association and the Money Services Business Association, is to help payment companies fight illicit activity such as money laundering and terrorism financing. But its authors also hope the standards will help protect against so-called de-risking by banking partners leery of the legal danger such business partners can pose, a problem that has long plagued the industry.
Banks can be held liable for processing any illicit payments that a partner sends or receives on behalf of a customer. In some cases, they will choose to simply cut off business with a money-services company that may have an uneven or unknown record of compliance with anti-money-laundering rules.
The authors of the best practices released Wednesday hope the document will enable money-services businesses that adhere to its standards to better demonstrate that they don’t pose an outsize risk when it comes to their compliance protocols.
“To be able to hold this up and say, ‘I’m meeting these standards,’ the trade groups believe that this will enable market participants to more easily obtain banking relationships,” said
deputy head of financial crimes compliance for
Western Union Co.
“The perceived risks and cash-intensive nature of money-services businesses have made it challenging for many of them to open and maintain bank accounts in recent years,” said
vice president and senior counsel for the American Bankers Association, who advised on the creation of the best practices.
“These guidelines are an important step in helping money-services businesses develop and adhere to robust compliance programs that have the potential to facilitate more banking relationships going forward,” Mr. Rowe said in an emailed statement.
The document, which has more than 40 pages, includes discussions of transaction monitoring, due diligence and know-your-customer procedures.
Companies that facilitate payments range from traditional money-transfer companies such as Western Union to financial-technology startups looking to disrupt the traditional financial order. One challenge was designing standards that would be relevant to a broad spectrum of those companies, its authors said.
“You can see that the document is designed to capture the common ground among all those entities,” said
senior vice president of government relations for ETA. The bottom line, he said, is “what does every single money-services business need to think about to put them in the best position to fight fraud?”
Write to Dylan Tokar at firstname.lastname@example.org
Corrections & Amplifications
Remarks from Rob Rowe, vice president and senior counsel for the American Bankers Association, were incorrectly attributed to a spokeswoman for the ABA in an earlier version of this article. (Corrected on May 12)
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