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Swiss–UK Dialogue: Promoting a Coordinated Response to De-RiskingFlorence Keen and Kayla Izenman
Conference Reports, 11 January 2019
Centre for Financial Crime and Security Studies, UK Counter-terrorism, AML/CTF, Global Strategy and Commitments, UK, Global Security Issues, National Security, Organised Crime, Resilience, Europe
De-risking, which refers to the phenomenon of financial institutions restricting or terminating relationships with clients who fall outside their risk threshold, has led to significant challenges for various sectors, including respondent banks, money-service businesses and non-profit organisations (NPOs), to maintain or establish bank accounts and correspondent banking relationships. Concerns about financial crime risks are seen as an important – albeit not the only – contributing cause of de-risking. For example, banks providing services to NPOs operating in conflict zones are concerned about funds ending up in the hands of sanctioned actors.
However, the exclusion of certain actors from the formal financial system has been found to displace rather than address the underlying risk. In addition, by frustrating the financial operations of NPOs designed, for example, to facilitate post-conflict reconstruction or counter violent extremism, de-risking may in fact hinder other components of counterterrorism efforts.
Despite growing awareness of the de-risking problem and multiple initiatives designed in response, the affected sectors continue to report significant challenges. Accordingly, the conference co-organised by the Embassy of Switzerland in the UK and RUSI on 29 October 2018 sought to take stock of the implementation of existing initiatives, analyse remaining obstacles, and identify priority actions for the future.
As reflected in this conference report, discussions focused in particular on the need for trust among stakeholders, a nuanced risk understanding, clear regulatory expectations, and leadership in promoting financial inclusion at the national level. The report identifies specific measures that should be taken as a matter of priority, both to create the overarching conditions for an effective response to de-risking and to tackle sector-specific challenges.
BANNER IMAGE: The Embassy of Switzerland in London, 2013. Courtesy of Sdrawkcab/Wikimedia Commons.