Banking partnerships are essential for all Financial Services companies. Although in some jurisdictions and using some NBFI partnerships you are able to exist without a bank account, it is a very complex and difficult task. But the derisking epidemic has hit NBFIs in most markets in the world, either as a direct effect of bank account closures or the effect of local banks losing correspondent bank accounts in the major markets or being forced by major banks to dump NBFIs from their client roster in order to continue providing the local bank international services.
Derisking refers to bank closing the accounts of clients they have considered “high risk” such as NBFIs (money service businesses, money transmitters, foreign exchange firms, fintechs, cryptocurrency firms) but also foreign embassies, nonprofit organizations (charities) and correspondent banks. Although compliance concerns have been raised, the reality is that these businesses are believed to provide the bank low profits, increased AML/CFT scrutiny costs, reputational risk, and raises the possibility of fines from regulators if those accounts are not well monitored. Anti-competitive behavior by banks has also been raised in the legal system when banks have been challenged in the courts.
We at Mohr World have been able to work with banking institutions that have teamed up with us to help them in procuring clients and establishing long-lasting banking partnerships where both the bank and the NBFIs understand and work together in a cost-sharing and compliance structure that works well for both institutions.
The idea is not just to open a functional bank account but establishing a Banking Partnership where both sides understand the services each other provides, the costs involved, the risk management policies they have and are able to develop trust based on good communication channels.
Our Corporate Partners work together to provide the best advice and guidance to institutions in either side or both sides, of the Banking Partnership, leveraging their expertise in legal counseling, compliance management and the business understanding of the products & services, knowledge needed to ensure a lasting and fruitful relationship between parties.