(Reuters): Top UK regulator sees problem with foreign money laundering rules

From: Berhane Habtemariam <Berhane.Habtemariam_at_gmx.de_at_dehai.org>
Date: Tue, 4 Nov 2014 16:01:58 +0100

Top UK regulator sees problem with foreign money laundering rules


Tue Nov 4, 2014 2:37pm GMT

* BoE deputy governor says money laundering rules damaging

* Some emerging economies cut off from financial markets

* Comments follow hefty U.S. fines for European banks

* BoE also sees some hit to liquidity from EU regulation (Releads with
comments on money laundering)

By David Milliken

LONDON, Nov 4 (Reuters) - The over-zealous application of anti-money
laundering rules is hampering British banks abroad and cutting off poorer
countries from global financial markets, a top Bank of England regulator
said on Tuesday.

BoE deputy governor Andrew Bailey, who heads the arm of the central bank in
charge of most day-to-day financial regulation, said British banks risked
being put out of business if they tripped up on foreign money laundering
rules.

British banks including HSBC, Standard Chartered and RBS have been fined
hundreds of millions of dollars by U.S. regulators in recent years, although
Bailey did not mention the United States directly.

Banks fear they could be held liable even if they are only indirectly
connected to someone involved in money laundering, and HSBC's chairman
Douglas Flint said in August that this was hurting poorer countries.

"We have no sympathy with money laundering, but we are facing a frankly
serious international coordination problem," Bailey told British
legislators. "We are seeing clear evidence ... of parts of the world and
activities that are being cut off from the mainstream banking system."

"It cannot be a good thing for the development of the world economy and the
support of emerging countries ... that we get into that situation," he
added.

British banks have become increasingly reluctant to deal with some
countries, sometimes with legal consequences. The largest money transfer
business in Somalia, Dahabshiil, took Barclays to court last year after the
latter withdrew banking services.

British media have also reported cases of charities with overseas operations
having bank accounts closed, as banks judge the small profits from providing
the accounts do not compensate them for the costs of checking everything is
in order.

BNP PARISBAS CASE

The BoE has expressed unease at how U.S. regulatory bodies at federal and
state level can impose potentially devastating penalties on banks, including
the suspension of a banking licence or removal of access to U.S. dollar
finance.

Matters came to a head in June when France's BNP Paribas was fined $8.9
billion and temporarily barred from accessing some U.S. dollar clearing
markets after breaching U.S. sanctions against Sudan, Cuba and Iran.

"I have to spend a large part of my time dealing with the issues that come
up in this field ... because some of the consequences of the actions taken
are potentially existential," Bailey said.

Speaking at the same session, a fellow deputy BoE governor, Jon Cunliffe,
said some European Union regulatory changes since the financial crisis may
have increased frictions and costs in wholesale financial markets.

"Liquidity and market making does seem to have been reduced," Cunliffe said.

David Rule, the BoE's executive director for prudential policy, said banks
had responded to regulatory incentives and increased their focus on the real
economy, rather than financial market trading for its own sake. (Additional
reporting by Andy Bruce; Editing by Tom Heneghan)

C Thomson Reuters 2014 All rights reserved

 
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