Diamond Trade Hit by Money Laundering Rules, says Watchdog
January 09, 22
(IDEX Online) - Diamond traders are among the worst-hit by rules designed to outlaw money laundering, say European regulators.
Financial institutions err on the side of caution, says the independent Paris-based European Banking Authority (EBA), adversely affecting sectors considered high risk, such as diamonds and other precious stones, as well as gambling operators.
In its 40-page report, entitled Opinion of the European Banking Authority on 'de-risking, it also identifies "cash-intensive business, such as money remitters, car traders, hairdressers or coffee shops".
Lenders often lack the expertise or resources to properly assess risk, and as a consequence they de-risk by avoiding the diamond and other sectors.
"Unwarranted de-risking is a significant issue across the EU, with a potentially significant adverse impact on the EU financial system's integrity and stability," the EBA said.
"Respondents indicated that in some instances, they had been denied opening a bank account. In other instances, they reported difficulties with their existing accounts, such as excessive delays in cash transfers in certain jurisdictions where they are conducting their humanitarian interventions; freezing accounts and in extreme cases, closing accounts and exiting a customer relationship."
Traders resort to workarounds, says the report, which include carrying cash across borders into conflict areas, using personal bank accounts for transferring and receiving funds, or using money transfer businesses.