Asylum seekers barred from financial system by some EU banks, says watchdog

Band Huw Jones

LONDON, January 5 (Reuters)Some European Union banks are excluding asylum seekers and other types of customers in clumsy efforts to comply with anti-money laundering rules, the bloc’s banking watchdog said.

Banks have grown much more nervous as regulators in the EU, US and elsewhere crack down on inadequate ‘know your customer’ checks, prompting some people to complain of being unfairly excluded of the financial system.

The European Banking Authority (EBA) said on Wednesday that its research found that so-called risk reduction by banks and payment companies is happening across the EU and particularly affecting asylum seekers and non-profit organizations.

When reducing risk, banks exclude certain customers because their profile suggests potential money laundering or terrorist financing risks that could harm their reputation.

“The EBA’s findings suggest that risk reduction has a negative impact on the achievement of EU objectives, in particular regarding the effective fight against financial crime and the promotion of financial inclusion, competition and stability in the single market,” the watchdog said in a statement. .

The EBA said it had already issued guidance for national regulators and banks on how to properly manage money laundering risks. It will verify the measures taken by national regulators to combat unjustified risk reduction and report in 2023.

After a money laundering scandal at Danish bank Danske, the European Commission presented proposals last year to create an anti-money laundering authority as well as other measures which the EBA said would help end unjustified risk reduction.

But the Commission could go further by clarifying in what situations an account with basic features should be rejected or closed, along with a complaints mechanism for customers, the EBA said.

(Reporting by Huw Jones; Editing by Alexander Smith)

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Don F. Davis