The Treasury Department is vowing to provide new regulatory guidance to banks in an effort to ease their doubts about doing business with international money transmitters.
The promise comes amid efforts by federal banking regulators to force banks to improve their compliance with laws designed to prevent money laundering and terrorist financing. Some banks have determined that the compliance risks associated with certain money transmitters are no longer worth the fees those accounts generate.
In an Oct. 8 blog post, Assistant Treasury Secretary Daniel Glaser wrote: "Treasury is working with the federal banking agencies to update guidance to make clear that banks should not be treating all money transmitters as high-risk and that with sufficient controls, banks can effectively manage high-risk money transmitters."
Glaser, who leads the department's efforts to combat terrorist financing, also said that Treasury is having discussions on the international stage that are aimed at addressing the problems facing money transmitters. He cited recent meetings with U.K. financial officials, as well as discussions with the Financial Action Task Force, an intergovernmental group that seeks to combat money laundering.
"This issue will remain a high priority for the Treasury Department," Glaser said.
Banks' increased reluctance to offer their services to remittance providers has been felt in communities of immigrants from Africa and Latin America.
The most precarious situation involves firms that Somali-Americans use to send cash to their relatives back home. Remittances provide a crucial lifeline for millions of Somalis. But because the war-torn East African nation lacks an effective anti-money-laundering system, and is home to the Al-Shabaab terrorist group, U.S. banks and regulators view Somali remittance providers as especially risky.
Earlier this year numerous Somali money transmitters were told they would soon lose their accounts with the one U.S. bank still willing to serve them. The bank in question, Merchants Bank of California, eventually reversed its decision.
As the noose has tightened around the neck of numerous Somali money transmitters, the Treasury has been facing criticism for failing to take more aggressive steps to preserve the remittance pipeline.
In August, a spokesman for the Office of the Comptroller of the Currency told American Banker that a Treasury-led task force could play a constructive role in addressing the Somalia issue, and that the OCC has suggested the idea.
Treasury's new promise to revise existing guidance on money transmitters means that regulators are planning to update an interagency statement they released in April 2005. That 14-page document lists "minimum steps" banks should take when they do business with money services businesses, including money transmitters.
Jay Postma, who heads a consulting firm that specializes in compliance for money services businesses, is skeptical that the revised guidance will have a significant impact on field examiners' attitudes about money transmitters.
In recent speeches top banking regulators have tried to ease banks' fears, but those messages have not filtered down to the lower levels of the banking agencies, he said.
"You still have agents in the field who simply don't know and understand these businesses, and are telling banks to get rid of them," Postma said.