‘De-Risking’, De-Banking and Denials of Bank Services: An Over-Compliance Dilemma?

Abstract

AbstractThis chapter considers the impact of drivers of over-compliance or so-called ‘gold plating’ on decisions of banks to terminate or restrict relationships with customers and counterparts. It draws on a South African study of factors that influenced overly-conservative design of anti-money laundering and counter terrorist financing measures of South African banks in a rule-based context. It considers whether the identified drivers are still relevant in a risk-based context. The chapter concludes that the broad drivers remain relevant and that regulators that wish to limit risk-informed de-banking should avoid strengthening the drivers and consider how best to neutralise them.