Seek and ye shall find

At least once a month someone, on hearing my line of work, will have a go at me about how “money laundering” has got in the way of their opening a bank account, getting a loan, buying a house or some other financial activity without “having to give them loads of information”.  I just smile and nod and trot out the usual explanation that the law is actually quite reasonable but sometimes financial institutions blame it when they are collecting information for other purposes (to safeguard their investment, for instance, or to sell you more stuff).  But sometimes the AML legislation does have unintended consequences.  When the sale of marijuana for recreational purposes was legalised in several American states in 2014, for example, the businesses that set up to sell the stuff quickly found that they could not get bank accounts.  If a bank accepts money from the sale of an illegal substance it is laundering that money, and most banks did not have their head offices in the states where the sale of pot was now legal.  I am told that the cities where pot sales are highest (boom boom) – such as Denver – are now criss-crossed by armoured vans full of cash, collecting from licensed shops and paying authorised suppliers, as none of them can use the banking system.

And it appears that a similar situation is developing in western Europe, where AML requirements are making it difficult for a certain class of legal customer to get access to financial services – this time, it’s asylum seekers.  The situation is particularly acute in Sweden, now home to one of the highest number of migrants fleeing conflicts in Syria, Afghanistan and elsewhere in the Middle East.  In 2015, 163,000 migrants headed to Sweden, attracted by its generous asylum laws and well-functioning welfare system.  But so far, according to Swedish Financial Markets Minister Per Bolund in an interview in April 2016, fewer than 500 of them have so far found a job.  And the main reason?  If a bank cannot verify an applicant’s identity, it will not open an account for him.  Asylum seekers – in legal limbo as they are – often lack the standard identity documents that a bank would want.  And without a bank account, it is not easy to receive a salary in a sophisticated western country.  The irony is even greater as in Sweden there are jobs aplenty for the asylum seekers: the country is currently experiencing an economic boom, and the government has said that 700,000 new homes need to be built by 2025 to address a housing shortage created by population growth – which means that about 10,000 workers will need to be recruited each year in the construction industry alone.

Step forward the European Banking Authority, which on 12 April 2016 issued an Opinion on the application of CDD measures to asylum seekers, stating that asylum seekers’ access to financial products and services is “important and necessary”.  A well-written and helpful document, it offers a solution to ensure that asylum seekers can gain access to essential financial services: “In most cases, money laundering and terrorist financing risks – including those associated with weaker forms of customer identification – can be managed effectively by offering a more limited range of services or setting up stricter internal controls, which will facilitate early intervention in the event of suspicion.”  Perhaps we should get the EBA to say something about de-risking: they sound a sensible, practical and compassionate bunch.

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4 Responses to Seek and ye shall find

  1. Correction: In an earlier version of this post, I wrongly attributed that compassionate Opinion to the European Central Bank, when in fact it was published by the European Banking Authority. I’m sure the ECB is lovely too, but it is quite right that the EBA gets the credit in this case – many thanks to them for contacting me and pointing out my error so politely, and apologies to them for making it in the first place. (The link always went to the right place – it was my attribution that was wrong.)

  2. j corbyn says:

    Susan – I can’t let this pass, the idea that certain groups of immigrants do not work because of account opening practices (a new victimhood claim!) if this was true, we would see variances across different countries that do not have the same restrictions. We would also see the same sorts of problems across all immigrant groups irrespective of culture or religion.

    But: look at the evidence from the UK

    Same patterns of same groups with very high unemployment/welfare levels. Look for a simpler answer than the made up excuses of the Minister.

    • Welcome to the blog, j corbyn, and thank you for your comment.
      I wasn’t saying that the lack of a bank account is the only reason why certain people (immigrant or home-grown) do not work, only that it can be an important factor. And the Swedes in particular have pinpointed it as an important factor in their country. The lack of a bank account is a problem for plenty of reasons, not least because nowadays, in developed countries, it is increasingly hard to get state benefits in any other form than a bank transfer. I think it is wrong to look for a simpler answer – I think it is a very complicated situation (and not one that lends itself, if indeed anything does, to stereotyping by “culture or religion”), and access to financial services is one element of it. And, in the context of this blog, it’s the only element on which I feel I am even slightyly qualified to comment!
      Best wishes from Susan

      • j corbyn says:

        The Swedish authorities are parroting this line – or lie – I would suggest as they are terrified of admitting the failure of their experiment with mass immigration. Blame the financial institutions, not the individuals responsible. DYOR on the facts of non-assimilation in Sweden.

        I like your blog, and don’t want to derail it so will not post on this subject again – but it is important that false memes re the ‘success’ of the Swedish experiment are examined.

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