Regulators seek to ease banking worries over money-laundering checks

By Huw Jones

LONDON (Reuters) – International regulators will write new banking rules for checking whether a potential customer poses money-laundering or terrorist financing risks.

The move is part of efforts by the world’s central banks to stop cross-border banking from fragmenting under the weight of tougher anti-money-laundering rules which have prompted some lenders to pull out of markets.

The Committee on Payments and Market Infrastructures (CPMI), made up of central bankers from across the world, said on Wednesday that lenders want greater clarity on how to comply with mandatory anti-money-laundering checks of customers.

The aim is to create “know-your-customer” utilities, or data bases, that would obtain information on customers from across the banking sector for use by all banks. This would save time and money by avoiding many checks on the same customer.

CPMI said it would ask the International Organization for Standardisation to define the basic set of information that all such utilities would collect and that all banks have to be ready to provide to other banks.

Banks have also asked for assurances from regulators and law enforcement authorities that lenders can rely on information from utilities for complying with anti-money-laundering and terrorist financing rules.

CPMI said the Basel Committee of banking supervisors and the global Financial Action Task Force will look at ways to support the use of utilities.

CPMI published five recommendations to address fragmentation in so-called correspondent banking, the cross-border web that allows people to move money from one country to another.

“The CPMI expects that the relevant stakeholders will initiate any necessary reviews or investigations in the light of the five recommendations as soon as possible,” it said in a statement.

Tougher rules to stop money-laundering and other illegal activities have prompted banks to cut links and reduce the cost of stringent checks on who is using their systems.

Such checks are harder in less developed countries that are perceived as very risky, or not worthwhile when the volume of business is too low to cover compliance costs.

Central bankers worry these trends are fragmenting the global financial system and excluding people or even countries from the benefits of cross-border payments, especially where remittances are a significant portion of a nation’s economy.

(Reporting by Huw Jones; editing by Adrian Croft)