A US regulator has proposed a new rule aimed at compelling banks to lend to “unpopular” businesses such as oil businesses and gun manufacturers.
In a move that would have a big impact on anti-money laundering (AML) programmes, the Office of the Comptroller of the Currency (OCC) is proposing requiring large banks to extend services and credit to any customers that pass their risk assessments.
The move, by comptroller Brian Brooks, is aimed at ensuring “fair access to financial services” in the face of pressure on banks not to lend for certain activities, including certain healthcare and social service providers, family planning organisations, oil and gas projects, private prisons, money services businesses (MSBs) and makers of shotguns and hunting rifles. President Trump last week announced his attention to nominate Brooks, who has been acting comptroller since May, to a five-year-term.
The proposal would mean that banks can’t deny financial services unless the individual person or business has failed to meet risk-based standards and this failure has been quantified and documented by the bank. The aim is to stop banks from refusing finance to categories of people or businesses based on their opinion of the activity being carried out.
Jim Richards, founder of RegTech Consulting, posted on the Linked In platform that the move has “big implications for big bank BSA/AML programs”.
Richards said: “In order NOT do business with MSBs or casinos or payday lenders you’ll be expected to have a documented MSB program, casino program, payday lender program. This will also have ramifications for your risk assessment process: that process could conclude that providing certain financial services to MSBs is beyond your risk tolerance, yet you would still be expected to document your reasons for not providing those services to any particular MSB.”
The proposal would apply to OCC-covered banks with $100bn of assets or more.
A public consultation on the plans runs until 4 January. It is not clear at this stage what impact the arrival of Joe Biden in the White House in mid-January is likely to have on the plans.