De-risking is the practice of a firm declining to onboard, or terminating, entire categories of customer in order to avoid the perceived burden or risk of managing their money-laundering and sanctions exposure, rather than assessing and managing that risk on an individual basis. Commonly affected groups have included money service businesses, charities operating in conflict zones, certain fintechs, and customers with connections to higher-risk jurisdictions, as well as some politically exposed persons.
Why the FCA is concerned
The FCA has repeatedly warned that wholesale de-risking is inconsistent with the risk-based approach required by Regulation 18 of the Money Laundering Regulations 2017, which expects firms to assess and mitigate risk proportionately rather than simply avoid it. Blanket exits can cause financial exclusion, push activity into less transparent channels, and, in the case of PEPs, conflict with the FCA’s guidance that domestic PEPs should generally be treated as lower risk and not subjected to automatic refusal.
The regulatory response
Following concerns about access to banking, the FCA conducted a review of account closures and de-risking published in 2023, finding that firms could not always demonstrate that exit decisions were properly justified or proportionate. Firms are expected to make and document case-by-case decisions, give customers fair treatment, and avoid using AML risk as a blanket pretext for exiting unprofitable relationships. De-risking sits at the intersection of financial-crime compliance and Consumer Duty obligations on fair treatment.
Who it applies to
Banks, payment institutions and other regulated firms making onboarding and exit decisions, overseen by financial-crime, compliance and senior management.