Heat versus Light: Fact-Checking the Debate over De-Risking

Mark Nance, Eleni Tsingou, Stephen J. Kay

Research output: Working paperResearchpeer-review

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Abstract

In this article, we examine the evidence for claims about the connection between bank de-risking and anti–money laundering (AML) regulation. Specifically, we examine evidence for the claim that the cost of increased AML compliance and increasing bank fines have led to banks exiting entire sectors or geographical regions and that this de-risking is deeply damaging to economies. We draw on multiple sources of evidence, including financial flow data, discourse and social media analysis, an evidentiary history, elite interviews, and participant observation. In the end, we find that substantial evidence contradicts this simple explanation of de-risking. Current efforts to review and reform the AML regime are overdue, and we need a sustainable answer to the issue of financial exclusion. That said, the evidence we present here suggests that efforts to curb de-risking should not focus primarily on AML, nor should AML reform focus primarily on de-risking.
Original languageEnglish
Place of PublicationAtlanta
PublisherFederal Reserve Bank of Atlanta
Number of pages20
DOIs
Publication statusPublished - 2021
SeriesFederal Reserve Bank of Atlanta’s Policy Hub
Number8-2021

Keywords

  • Anti-money laundering
  • AML
  • Conterterrorism financing
  • CFT
  • De-risking
  • Financial Action Task Force
  • FATF

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