Federal Agencies Issue Joint Statement on Using Risk-Based Approach to Customer Relationships

The statement reinforces their position that financial institutions should evaluate risk on a customer-by-customer basis and not by industry.

07/08/2022 4:15 P.M.

3.5 minute read

No customer type presents a single level of uniform risk or a particular risk profile, five federal banking agencies stressed in a joint statement released July 6.

The statement, issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively, the “Agencies”), restates their position that banks and credit unions must take a risk-based approach to assessing individual customer risk.

“Not all customers of a particular type automatically represent a uniformly higher risk of money laundering, terrorist financing, or other illicit financial activity,” the Agencies said in their statement.

The statement applies to all customer types referenced in the Federal Financial Institutions Examination Council FFIEC Bank Secrecy Act/Anti-Money Laundering Examination Manual, including professional service providers, cash intensive businesses, nonbank financial institutions and customers the bank considers politically exposed persons.

“As a general matter, the Agencies do not direct banks to open, close, or maintain specific accounts,” according to the statement. “The Agencies continue to encourage banks to manage customer relationships and mitigate risks based on customer relationships, rather than decline to provide banking services to entire categories of customers.”

Businesses in the accounts receivable management (ARM) industry and ACA International members continue to have their banking relationships unfairly terminated. ACA CEO Scott Purcell noted that two member companies recently lost their banking relationships without a solid explanation as to why.

“What we need in addition to the good sentiment expressed in the Agencies’ joint statement is action consistent with those sentiments,” Purcell said. “The work of ACA members is incredibly valuable to the American public, saving every American family roughly $706 a year from rising prices, and in this high inflation time our services are more valuable than ever.”

Read the Agencies’ joint statement here.

ACA Advocacy

ACA International applauds U.S. Reps. Blaine Luetkemeyer, R-Mo., and John Rose, R-Tenn., who pushed the Federal Financial Institutions Examination Council for this guidance. We appreciate their support to ensure that lawful businesses remain banked.

ACA’s advocacy leadership works with the Fair Access to Banking Coalition, and held a meeting in April at U.S. Sen. Kevin Cramer’s, R-N.D., office on behalf of members to ensure access to banking services continues in the ARM industry in the wake of Operation Choke Point, ACA previously reported.

“Working with Congress to ensure Fair Access to Banking in concert with other law-abiding businesses that serve the American public is important so that no legitimate businesses are ever denied access to everyday banking services,” Purcell said.

The U.S. Senate introduced the Fair Access to Banking Act, sponsored by Cramer, to ensure that banks have a responsibility to make decisions about whether to provide a person with financial services based on impartial criteria, ACA previously reported.

Credit and collection professionals have had their banking relationships abruptly terminated on numerous other occasions since the inception of Operation Choke Point. In states where a banking relationship is required to have a license to operate, this can threaten the existence of collection businesses, as well as their employees’ jobs.

While the number of ACA members impacted by banking terminations has declined since the height of Operation Choke Point, the highly questionable practice of categorical discrimination from banks against the debt collection industry continues.

“We are supportive of processes where elected officials make decisions on laws with the goal to be accountable to constituents,” Purcell said. “I’m hopeful these protections in the Fair Access to Banking Act come about so no administration can pick and choose which legitimate businesses are able to survive.”

Cramer, through the Fair Access to Banking Act, seeks to continue a rule from the Office of the Comptroller of the Currency (OCC) that codifies more than a decade of OCC guidance stating that banks should conduct a risk assessment of individual customers, rather than make broad-based decisions affecting whole categories or classes of customers, when provisioning access to services, capital and credit.

ACA sent a letter to Cramer in support of the legislation.

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