WASHINGTON – NCUA and the five baking agencies last week issued guidance aimed at easing growing concerns on handling deposits from foreign diplomatic missions, as unrest around the Middle East is throwing many foreign delegations into turmoil.
The new guidance says the regulators do not expect credit unions or banks to define or treat foreign mission customers as necessarily posing a higher level of risk than other customers. It is up to the financial institution to assess and understand risks to stay in compliance with the Bank Secrecy Act.
Closures of foreign diplomatic mission accounts by a number of banks have caused troubles for many foreign countries, whose embassies have been looking for new accounts with banks or credit unions, with little success. JP Morgan Chase & Co. last September told diplomatic missions in a letter that it had “made the decision to close its division that serves diplomatic and foreign government entities.” The bank had termed it a “business decision” but gave no further explanation.
Representatives said banks were feeling overburdened by surveillance, reporting and compliance costs associated with the foreign mission accounts. The Bank Secrecy Act is designed to prevent transfers of money from corruption, terrorist financing, drug trafficking or weapons proliferation through the U.S. financial system.
The regulators said in the guidance banks could enter into written agreements with foreign missions that clearly define the terms of use for the accounts. Banks also could offer limited purpose accounts for items such as payroll, office rent and maintenance only, they said.
“By clarifying our expectations, the agencies are confirming that the financial institutions have the flexibility to provide services to foreign missions while also remaining in compliance with the BSA,” the regulators said.
The agencies said they expected banks to have risk controls systems in place that can adequately manage the varying degrees of risks in dealing with foreign missions.
