This Week in AML

What is Fair Access to Banking?

This week, Executive Vice President John Byrne, and Creative Director Elliot Berman of the AML RightSource staff talk about the recently proposed Fair Access to Banking Act. John and Elliot discuss the mandates in the Act, the challenges it presents to risk-based compliance programs, and the types of entities that are not included in the coverage of the proposed legislation. 


What is Access Banking? TRANSCRIPT

Elliot Berman: Hi, John, how are you this week?

John Byrne: Hi, Elliot. How are you doing?

Elliot Berman: I'm good, thanks.

So, want to talk about something that really happened last week, but I still think is worth talking about. Senator Kevin Cramer, who's a Republican from North Dakota and a member of the Senate banking committee, issued or proposed a fair access to banking act that had a fair number of co-sponsors - but it's an interesting twist on fair access. Did you see that that item come up?

John Byrne: I did. I want to give credit to my former colleagues at ACAMS  - there's a short story on this - you're right. It was introduced last week. But there's a concept that's been around and frankly, we talked about the previous administration's OCC rule on this, but yeah, a couple of things struck me. One is the title. As we both know, we've [the AML Community] been working extremely hard with humanitarian and charity groups for a number of years to see if we can't get some clarity, some certainties, so that if financial institutions who put those entities in higher risk categories, because of the way it's been defined can actually bank those entities if they better understand one another. So giving access to those entities for MSBs, [money service businesses] have always struggled because of, again, the characterization. So fair access makes a lot of sense. Conceptually, the provisions in this bill, in my humble opinion, do not, for a variety of reasons, which I know we'll talk about.

Elliot Berman: Yeah. It is interesting. Essentially it's requiring banks to provide financial services to any company or any person that's legally compliant. And it focuses on financial institutions, banks, and credit unions with over 10 Billion in total consolidated assets.

But it also has an impact on the payment card payment networks, which is both debit and credit. And essentially it's following, as you pointed out, the previous administration's fair access final rule.

John Byrne: Yeah and a couple quick points - so this is – we just have call it what it is - this is a political party that has always favored the market making decisions with some limited regulation. Here, we have a situation where they want to penalize banks and credit unions for not accepting certain banking relationships. And to me, that's more than counterintuitive.

Elliot Berman: Yeah. The other thing about this is when you think about free trading and the ability for businesses to make their own decisions, as long as they don't discriminate against people in protected classes, that's the one limitation that this is really pushing banks or financial institutions to be more like utilities. And over the years the economic history in the United States, there's been a lot of discussion about what should be utility and what shouldn't.

And we've settled on a bundle of services that fit under the utility approach. There are economic trade-offs to being utility - some of the things you have to do, but then you get something back here. The “gets something back” part is totally missing.

John Byrne: And for all of us in the AML community, one of the provisions in the bill would require banks to provide a written justification for why they are denying a person financial services, which runs totally opposite from how we handle suspicious activity. The age-old note from banks when they close the accounts - that's a short note that basically says because it doesn't fit our business model, because we can't tip off possible criminals, [etc.]. So the fact that there's no recognition of the importance of keeping that information confidential just runs so counter to AML financial crime prevention.

So clearly the drafters here made no effort to recognize the challenges that institutions have -  that are told on the one hand to do risk assessments, mitigate those risks when you can, and report activity that is potentially illegal to the government so that they can be investigated and in some cases prosecuted.

So that just turns everything on its head. And going back to my initial point, they're calling out gun dealers and coal producers, no mention to charities and humanitarian groups. This to me, I don't think this has a chance to get enacted, but this is really disappointing on so many levels.

Elliot Berman: Stay tuned - we talked about it when it was a proposal coming out of an agency in a prior administration, now it's a proposed Senate bill. We'll see where it goes. And when we see where it goes, we'll talk about it.

So John, you have a great rest of the week and a great weekend, and we'll talk to you next week.

John Byrne: Take care of Elliot. Stay safe.

Elliot Berman: You too. Bye bye.