Managing money laundering and terrorism financing (ML/TF) risk doesn’t mean avoiding risk altogether.
Debanking, also known as derisking, can have a devastating impact on legitimate businesses. It may also increase financial crime risks by reducing transparency or pushing activity into less regulated channels.
We discourage the indiscriminate or widespread closure of accounts across entire sectors.
Who debanking impacts
Debanking occurs when a financial institution declines, withdraws or limits banking services to customers in specific industries that they consider to be higher risk.
For example, this has affected:
- industries that provide services to transfer or store value for their own customers. This includes remitters, virtual asset service providers (VASPs) and financial technology (fintech) businesses
- some not-for-profit organisations, the sex work industry, adult stores, gun shops and some cash-intensive businesses.
Assess each customer individually
Businesses within the same sector can present different levels of risk. Financial institutions should assess each customer individually, considering:
- the customer and their business model
- the services provided and how they are delivered
- the countries or jurisdictions involved
- expected activities and transactions.
For customers who are reporting entities, consider the systems and controls they use to manage their inherent risks. This helps determine their residual risk, the risk remaining after controls are applied.
You may wish to ask questions about their AML/CTF program, or request a copy of it. However, we don’t expect you to audit a customer’s AML/CTF program or redo their risk assessment.
The key question is whether the customer’s measures to identify, manage and mitigate their risks appear reasonable.
A higher risk rating doesn’t automatically require you to decline or discontinue a business relationship. You may be able to manage the risk through proportionate controls, including enhanced customer due diligence and transaction monitoring.
Choosing to provide financial services to a customer will ultimately be a commercial decision. If you decline or discontinue services under your AML/CTF policies, document your reasons.
Where possible, give existing customers sufficient notice and provide genuine reasons for your decision. If your decision involves information protected by the tipping-off offence, ensure you meet your tipping-off obligations.
Our guidance on financial services for customers that financial institutions assess to be higher risk includes recommendations if you have decided to end a business relationship.
Regularly review your customers’ risk rating and take steps to manage risks
Financial institutions must review and, where appropriate, update their assessments of customer risk and know your customer information at a frequency appropriate to the ML/TF risk and in certain circumstances.
Your assessments and the outcomes based on your customers’ risk should be current, evidence-based and documented.
Conducting ongoing and enhanced customer due diligence when required will help you identify risks throughout the business relationship and apply your AML/CTF policies to manage and mitigate those risks.
If you’re an affected business, communicate openly and help your financial institution understand your risks
If you’re an affected business, you can help your financial institution understand your risk by providing information to:
- help the financial institution understand the legal structure of your business, and the individuals who ultimately own or control your business
- describe in sufficient detail the types of services you provide to your customers
- show that you understand, and have met, all licensing and other regulatory requirements applicable to your business
- share the results of any reviews of your own regulatory and risk management systems and follow-up actions (where permitted)
- share information about the types of customers you provide services to (you don’t need to disclose identifying information about individual customers)
- provide details of the geographical locations where your customers live and the locations they transfer value to using your services
- indicate the expected volumes of transactions you are likely to engage in using the financial institution’s services.
More information
For more information, read our guidance on financial services for customers that financial institutions assess to be higher risk.