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Harry Cassin
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FDIC wants banks to use ‘risk based’ compliance for each customer

The Federal Deposit Insurance Corporation (FDIC) issued guidance Wednesday encouraging its insured banks to take a risk-based approach in assessing individual customer relationships.

The FDIC said in its Financial Institution Letter that looking at risk on a case-by-case basis is better than declining to provide banking services to entire categories of customers. Banks should examine risks for individual customers, it said, and then determine if the bank can manage the risk.

“Financial institutions that properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customers operating in compliance with applicable laws,” the FDIC said.

The FDIC was apparently reacting to blanket decisions by some banks to deny service across certain business segments out of fear they might somehow violate AML provisions in the Bank Secrecy Act. The FDIC didn’t identify any of the businesses. There have been reports that banks are denying services to marijuana growers and sellers, money transfer firms, gun dealers, and others.

According to Doreen Eberly, the director of the FDIC’s risk management supervision division, federal banking agencies have recognized that financial institutions can’t detect and report every illegal transaction they handle. But compliance efforts based on risk assessments for individual customers are adequate if the banks impose controls to manage the relationship “proportionate with the risks” associated with each customer, she said.

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation’s banking system. It now insures deposits at more than 6,500 U.S. banks and savings associations.

The agency promotes “the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed.”

The FDIC receives no federal tax dollars — the insured financial institutions fund its operations.

The FDIC’s January 28, 2014 Financial Institution Letter is here (pdf).


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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