Wall Street should avoid cutting foreign bank ties: U.S. regulator

Tue Mar 21, 2017 11:11pm EDT
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By Patrick Rucker and Brett Wolf

WASHINGTON/ST LOUIS (Reuters) - U.S. banks should not cut ties with foreign clients over money- laundering worries unless officials have concrete cause for concern, a leading U.S. regulator is telling staff and lenders.

The message has come through phone calls, speeches and an uncommon notice from the Office of the Comptroller of the Currency, the top regulator for national banks, banking and regulatory sources said.

A four-page memorandum sent to bank examiners last month said foreign lenders and their customers are hurt when Wall Street turns its back.

"Customers that cannot make alternative banking arrangements elsewhere may effectively be cut off from the regulated financial system altogether," according to the "supervision tips" memo obtained by Reuters.

The OCC typically issues only a few such memos each year to help examiners navigate complex banking issues.

Policymakers have become increasingly concerned that banks are ejecting broad swaths of customers from the financial system out of fear of being penalized over money-laundering violations.

For example, customers with ties to Yemen or Syria have a harder time maintaining accounts and banks have ended such relationships, according to a senior compliance officer at a major U.S. bank.

To steer clear of violations, JPMorgan Chase & Co stopped doing business with 18,000 customers in 2015 and pulled back from 500 foreign partner banks, CEO Jamie Dimon told investors in a letter last year.   Continued...

A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 2016. REUTERS/Andrew Kelly