Latin American bankers have had a lot to deal with lately: a slump in commodity prices, China’s lower demand for their clients’ exports, and correspondent banking relations being cut because of ‘de-risking’.
De-risking has become a buzzword to describe both banking regulators’ tougher stance – particularly in the US – on fighting money laundering and terrorist financing, as well as international banks’ reaction to the new environment: cutting relations with clients or exiting whole markets that are deemed too ‘risky’. It has also been used as justification for unprecedented fines imposed by US authorities, which have cast bankers’ risk/reward analyses in a new light. Indeed, charging several dollars for a transaction for which they might be fined millions or even billions of dollars is not worth the trouble. Banks are now expected to be certain that no part of a transaction is in any way related to illicit activities. They need to know their customers, and their customers’ customers, and so on.
