Confirming that the U.S.’ Southwest border is at high risk for money laundering activity, the Government Accountability Office found in a recent review that bank branches in that region filed more than twice as many Suspicious Activity Reports than banks in other high risk areas. Customers in the region were also more likely to engage in cash-related business activities than other areas, GAO found.
As a result, an estimated 80 percent of banks in Southwest border communities terminated customer accounts over Bank Secrecy Act and anti-money laundering concerns, GAO noted. It added that money-laundering risks were more likely to drive decisions by banks to close branches in the Southwest. (Consistent with national trends, the Southwest border region has been losing bank branches since 2012.)
These findings indicate that BSA/AML regulatory concerns may be driving the trend of “derisking” among banks in border towns, GAO concluded, adding that “the actions taken to address derisking by the federal bank regulators and FinCEN and the retrospective reviews conducted on BSA/AML regulations have not fully considered or addressed these effects.” GAO recommended that the agencies conduct a comprehensive review of the BSA/AML regulatory framework to assess how banks’ regulatory concerns may be affecting their decisions to provide banking services. Federal banking regulators agreed to GAO’s recommendation, though FinCEN did not offer a comment. For more information, contact ABA’s Rob Rowe.