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Cmte Financial Services (R)
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McHenry at Hearing on De-Risking: We Should Re-Examine Our Approach to Ensure We Are Not Lumping in the Good with the Bad
Washington, Sep 14 -
Today, the House Financial Services Committee is holding a hearing on the impact of de-risking in the Caribbean. Witnesses at today’s hearing include Barbados Prime Minister Mia Amor Mottley, among others. Watch Republican Leader Patrick McHenry’s (NC-10) opening remarks here. Read Republican Leader McHenry’s opening remarks as prepared for delivery: “Thank you, Madam Chair for holding this hearing. “And thank you to the witnesses for appearing today. “De-risking is a critical issue. It’s also one this committee has not focused on since Republicans held the gavel in 2018. “At that time, the Subcommittee on Financial Institutions, led by Congressman Luetkemeyer, analyzed the impact of the Obama Administration’s Operation Chokepoint on American consumers, businesses, and communities. “Today, we’re looking at the global landscape and the implications of de-risking at a macro level. That’s important. “But, the underlying factors of de-risking remain the same. “Overly punitive supervisory and examination tactics employed by federal financial regulators can have serious implications. “Take, for example, the availability of banking services in jurisdictions deemed ‘high-risk’ like the Caribbean and towns along the U.S.- Mexico border. “It’s one thing if de-risking is an evidence-based response to illicit finance. “And let me be clear: we support that. “But when innocent people and legitimate businesses are being shut off from financial services, we need to take a step back. “We should re-examine our approach to ensure we are not lumping in the good with the bad. “The problem is this: “The penalty for failing to comply with anti-money laundering regulation can be so devastating for financial institutions, especially small and medium banks, that they turn to defensive approaches to ensure compliance. “Republicans have raised this issue numerous times in the context of Suspicious Activity Reports, or SARs. “Many banks carry out ‘defensive SARing’ to ensure they do not get penalized. “In 2021 alone, this resulted in over 3 million reports generated. “And I expect we will see a new record set every year moving forward. “It’s through this lens that we approach Caribbean de-risking. “U.S. banks are faced with a difficult decision. “Regulatory compliance costs, and the penalties for non-compliance, are so steep that financial institutions would rather end customer relationships than risk running afoul of the regulators. “The result is large scale de-banking for entire geographic areas that can sweep up ordinary people and small businesses. “The question of the day is: ‘Where do those de-banked customers go?’ “I’ll tell you. They go to China. “According to a report titled ‘Financial De-Risking in the Caribbean,’ which was authored by one of today’s witnesses, ‘from 2009 to 2016, Chinese correspondent banking relations grew from 65 to 2,246.’ “To put it another way, over an 8-year span, China gained 2,181 new ways to engage with partners in developing regions, like the Caribbean. “So, think about this: our current regime that compels banks to over file reports to not get penalized is actually driving customers and regions that regulators deem ‘high-risk’ underground or, worse, into the financial arms of the CCP. “I would argue it is in the best interest of our financial system, communities, law enforcement, and the federal government to be able to monitor and maintain these global banking relationships. “I look forward to hearing from the Prime Minister and our other witnesses today. “I yield back.” ###