Offboarding of Customers in Financial Institutions, because of Compliance Concerns

Abstract

This thesis investigates the economic- and legal risk justification in offboarding of customers in the financial sector. The financial sector has been battered by money laundering scandals, that have resulted in a financial sector that is extremely risk averse when there is any suspicion of foul play.
Since a compliance method does not exist, the thesis is divided into a legal and economic part with their own conclusion. These conclusions are the combined in an integrated analysis that finally culminates in the overall conclusion of the thesis. When analyzing the legal risk side of the offboarding of customers, it becomes clear, that there are flaws in the legal side of the fight against money laudering, when it comes to offboarding and de-risking of customers. When analyzing the economic risks included regarding money laudering, it becomes painstakingly clear that offboarding and de-risking with economic risk incentives are a real problem, and it is hurting the community. The thesis concludes that there should be taken legal measures to ensure that offboarding and de-risking of customers does not happen and that it is outlawed. Instead there are put in place, a sector wide compliance organization that monitors the customers, in all the various institutions. The idea is that the compliance organization is independent of the financial institutions and help with compliance oversight. Instead of having the compliance experience scattered all over the financial sector, it is possible to make an organization that is rich with experience to restore faith in the financial institutions.