No comments on this section, but a general comment:
AWDC would like to emphasize the importance to include wording that credit and financial institutions should document and motivate decisions to refuse a business relationship or to apply risk-mitigating measures. In many cases, credit and financial institutions do not reply to requests to enter into a business relationship. In other cases, refusals are given by phone, without any motivation.
AWDC wishes to highlight that the blanket refusal or termination by credit and financial institutions of a business relationship is sometimes not (only) motivated on the basis of ML/TF risks. AWDC has witnessed, in the Belgian market, a clear trend whereby credit and financial institution rely on ESG-considerations to justify a blanket refusal or termination.
Example: Belfius has issued a “Transition Acceleration Policy” (“TAP”) whereby companies that are (allegedly) in breach of one of the ten UN Global Compact principles and/or are active in any of the “controversial or sensitive” sectors “are excluded” from obtaining the a number of financial products and services from any Belfius Group companies
In relation to point 9 of the draft guidelines, where it is said that there should be a differentiation between the risks associated with a particular category of customers and the risks associated with individual customers that belong to this category, AWDC can only report that, as a general rule, credit and financial institutions based in Belgium continue to refuse or terminate business relationships with companies active in the diamond industry, without there being any concrete and serious risk assessment of the individual companies. In most cases, when a diamond company wishes to open a bank account with a credit and financial institution, the latter do not even ask for concrete information which would allow the bank to conduct a risk assessment. Blanket refusals and terminations remain the rule. It can therefore be said that in the overwhelming majority of cases, diamond traders continue to be rejected by credit and financial institutions based in Belgium. Credit and financial institutions do not try understand and assess, on the basis of concrete information, the ML/TF risks associated with entering into a business relationship with a diamond trader. This is, in our view, at odds with the risk-based approach warranted under the Directive (EU) 2015/849.
In relation to point 12 of the draft guidelines, where it is said that before taking a decision to reject or to terminate a business relationship, credit and financial institutions should satisfy themselves that they have considered, and rejected, all possible mitigating measures that could reasonably be applied in the particular case, AWDC continues to observe in practice that credit and financial institutions based in Belgium continue to apply a binary logic: either the business relationship is granted or it is totally rejected. To the best of our knowledge, the use of mitigating measures is non existing. AWDC would welcome that the guidelines specify that credit and financial institutions must keep a record of the mitigating measures that have been considered in concrete cases, together with the reasons why these measures were considered to be insufficient. It would also be very much welcomed that in particular cases credit and financial institutions must produce proof of the fact that these measures have effectively been considered (e.g., in proceedings where diamond companies challenge the lawfulness of the refusal or termination of a business relationship).
In relation to point 14 of the draft guidelines: AWDC fully agrees that credit and financial institutions should document any decision to refuse or terminate a business relationship and the reason for doing so. In practice, many credit and financial institutions argue that the so-called tipping-off prohibition prevents them to explain why a business relationship is refused or terminated. In the rare cases the lawfulness of the refusal or termination decision of the bank is challenged, banks usually refer to the tipping-off prohibition and argue that they are prevented by law to comment on the reasons why the business relationship has been refused or terminated. AWDC believes that guidelines should explain that the tipping-off prohibition cannot be applied in such a way that credit and financial institutions cannot motivate the decisions they have taken. Furthermore, it would also be welcomed if the guidelines specify that the tipping-off prohibition does not prevent credit and financial institutions to produce proof that an individual risk assessment has taken place. In addition, it would be welcomed if the guidelines specify that in particular cases credit and financial institutions should be able to produce a document that demonstrates that it has actually considered, on the basis of concrete information and on an individual basis, why a business relationship had to be refused or terminated.
In relation to point 18 of the draft guidelines, AWDC would welcome that it is specified that these policies and procedures must be published (i.e., be publicly available). For most companies these policies and procedures are simply a black box that sits with the compliance department of banks. It most cases, it is not even possible to interact directly with the compliance department.
In relation to point 20 of the draft guidelines, AWDC wishes to observe that in practice banks see the refusal or termination of the business relationship as the only option. For example, in a pending case where a diamond trader challenges the lawfulness of a Belgian bank’s decision to terminate a long standing business relationship with a diamond trader, the bank argues that its “only option” was to terminate that relationship, even though the alleged infringements of the AML legislation are vague and not substantiated. AWDC would welcome the clarification that the options chosen by the bank should be proportional and in line with the principle of non-discrimination.