Members of US Congress write on the banking risk

Jul 15, 2016 Letters

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Dear Editor;
Please see below to a letter from key members of the US Congress to the Treasury Department on the issue of correspondent banking/de-risking. While the interest of this group of Members of Congress is not necessarily the Caribbean, the region needs to intensify its lobby in Congress to ensure that its interests are advanced on this matter.

Just a few weeks ago I had the honor to chair an entire morning’s session on Capitol Hill during Caribbean Legislative Week at which every effort was made to further sensitize key members of Congress to the negative impact of de-risking on Caribbean economies. Among the members of Congress participating in these discussions were Charles Rangel, Yvette Clark, and Stacy Plaskett. Caricom governments need to engage the Caribbean Diaspora more seriously in the lobbying efforts on this issue.

Wesley Kirton
Editor’s note; the letter follows
The Honorable Eric M. Thorson
Inspector General
United States Department of the Treasury 1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Dear Inspector General Thorson:
We write to request an examination into the Office of the Comptroller of the Currency’s (OCC) execution of the Bank Secrecy Act (BSA), anti-money laundering regulations and Office of Foreign Assets Control (OFAC) and other sanctions laws compliance. As you are no doubt aware, there has been much attention paid by Congress, international governing bodies and other entities to the so-called “de-risking” trend. In disclosing to accountholders and investors why certain accounts have been terminated, banks generally note concerns about enforcement and supervisory risk; in other words, they do not believe they can earn a sufficient financial return on these accounts to offset the risk of punitive and perhaps ruinous enforcement action by regulators or prosecutors.
In a recent speech, Comptroller Curry stated that “the OCC generally does not direct the financial institutions we supervise to either maintain or sever account relationships. The decision to exit a line of business or to terminate a banking relationship with a customer resides solely with the bank, not with the OCC.”‘ OCC leadership has offered similar language in correspondence with Members of Congress regarding Operation Choke Point.
These statements do not comport with reports we have received. Financial institutions have made clear to us that this “de-risking” trend is very real, and is at least in part the result of actions taken by that OCC’s regulatory supervisory, examination, or other staff to influence a bank’s decision to exit a line of business or to terminate a banking relationship. Indeed, it is our understanding that OCC staff has made clear to banks that the institution is on notice with respect to a given correspondent or customer and that — while the decision is ultimately the bank’s — the bank will suffer supervisory or other consequences should anything go wrong with respect to that correspondent or customer.
Further, the Comptroller himself has previously made statements contradicting his March 2016 assertion. In 2015, Comptroller Curry stated that “the OCC does not encourage banks to terminate customer relationships without a careful analysis of the risks presented by that customer and the bank’s ability to manage those risks.”” He also stated, “We do not tell banks how to conduct their business. We certainly do not direct them to provide services to some customers and not to others. Still less, would we encourage banks to terminate entire categories of customers without regard to the risks presented.”‘ These statements indicate that in certain cases, the OCC may. in fact, encourage banks to terminate customer relationships or exit lines of business where the OCC believes that the risks presented are not able to be managed by the bank.

In his recent speech, the Comptroller stated, “through our supervisory process, we’ve been looking at whether banks have explicit policies on risk re-evaluation and who is involved in making a decision to terminate a relationship. We are also looking at whether banks use oversight committees to review these decisions, whether the decisions are reported to the Board of Directors or senior management, and whether the correspondents have opportunity to address concerns before the relationship is terminated.’ While we believe some of this information could be useful to financial regulators, particularly if a regulator works to combat unnecessary de-risking, we are concerned this statement could translate into new and substantial compliance burdens on financial institutions, and may be used as greater leverage over institutions.
Finally, we have received reports that increased regulatory and supervisory pressure has materially increased the cost of opening an account, and thereby forced more Americans out of the banking system.
Accordingly, we request that your office specifically investigate three areas with regard to the BSA and other anti-money laundering laws, and OFAC and other sanctions laws:
1. Whether supervisory, examination, or other staff of the OCC have indirectly or directly caused banks to exit a line of business or to terminate a customer or correspondent account.
2. Under what authority the Comptroller of the Currency is planning to limit through guidance the ability of banks to open or close correspondent or customer accounts, including a review of laws that govern account closings and the OCC’s authority to regulate account closings.
3. The average cost of opening a bank account and any increase from years past, including an analysis of the extent to which that cost has limited national banks’ ability to offer deposit accounts to low and moderate income individuals. In addition, please estimate the cost of opening an account and trends in that cost over time and whether that cost has had an impact on the types of accounts that banks offer. Please provide a similar analysis in regards to the time it takes to open a bank account.
We appreciate your attention to this matter and request a response from you by July 19,

Signed
Blain Luetkemery
Sean Duffy
Randy Neugeauter
Stephen Fincher
Keith J. Rofus
Tom Emmet
J. French Hill
Andy Bar

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