Imagine that you have been a customer with a bank for 20 years already and from one day to the next it decides that you are no longer eligible for a bank account. This is actually happening within the diamond industry. That means having to pay staff members in cash again, shifting to international banks based abroad or worse, having to close your business. This results in precisely those practices that are undesirable in the combat against money laundering and fraud. Yet banks are fueling these practices because they are de-risking.
Banks risk high penalties if they have insufficiently assessed the risk of money laundering and terrorism financing among potential and existing customers. To avoid that, they prefer terminating existing client relationships or refusing certain categories of persons or entire industries altogether (such as the diamond industry). In the diamond industry we have seen dozens of young starters leave for foreign countries because they are denied opportunities to build their businesses in their own country.
Fortunately, banking supervisors and also Belgian politicians take de-risking seriously and have taken action in that regard. On January 5th, the EBA (European Banking Authority) published an opinion with the result of its research on de-risking within European banks. It advised the European institutions that de-risking has a destructive effect on the objectives of the EU with regard to the fight against financial fraud and the stability of the unified market. Those are no empty words. The National Bank, in turn, asked the Belgian banks in a circular to take into account the EBA’s conclusions and advice. What is more, they are going to monitor to which extent Belgian banks are de-risking and which actions or initiatives they undertake to move towards an inclusive policy and better identify the risks of these customers without excluding them a priori. This is clear finger-pointing and a warning to take this seriously.
Also on a legal front things are moving. On the 8th of November 2020 a law on basic banking services was voted in Belgium. With this law companies which have already been refused a Belgian bank account 3 times before, can still open a bank account. They can start a procedure with a specialized basic banking service chamber with the FPS Economy. This chamber will then appoint a Belgian credit institution that provides a bank account and allows basic banking transactions to be executed, such as wire transfers and payments. The law should come into force beginning of July 2022.
Nevertheless, these initiatives do not eliminate all problems for entrepreneurs who are denied access today. Basic banking transactions are one thing, but whoever wants to expand his business or wants to invest, also needs to have access to capital just like every other entrepreneur. This law does not provide for that. A logical next step could be to address this discrimination.
Trisevgeni Stavropoulos
Head of Compliance Antwerp World Diamond Centre
Disclaimer: www.awdc.be/disclaimer