Senate Bill Report, SJM 8004 — Addressing "de-risking" by financial institutions (February 11, 2021)

Summary

Senate Bill Report on SJM 8004, as of February 11, 2021, with the brief description Addressing "de-risking" by financial institutions, prepared for the Senate Committee on Business, Financial Services & Trade. The brief summary says the joint memorial directs Congress to enact legislation that will provide transparency to customers or former customers of financial institutions that need to send remittance to families in other countries through wire transfers. The summary of the joint memorial lists requirements that financial institutions disclose specific reasons for closing accounts. The report includes a staff summary of public testimony with PRO and OTHER positions and states that a fiscal note was not requested.

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                             SENATE BILL REPORT
                                  SJM 8004

                                      As of February 11, 2021

Brief Description: Addressing "de-risking" by financial institutions.

Sponsors: Senators Hasegawa and Saldaña.

Brief History:
     Committee Activity: Business, Financial Services & Trade: 2/11/21.


                               Brief Summary of Joint Memorial
           • Directs Congress to enact legislation that will provide transparency to
             customers or former customers of financial institutions that need to send
             remittance to families in other countries through wire transfers.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Clinton McCarthy (786-7319)

     Background: The term "de-risking" refers to the phenomenon of financial institutions
     terminating or restricting business relationships with clients or categories of clients to avoid,
     rather than manage, risk. Remittance refers to an amount of money transferred or sent from
     one party to another, usually overseas. Bank Secrecy Act/Anti-Money Laundering
     (BSA/AML) regulations imposed through the Patriot Act and other federal legislation
     imposes strict standards on banks to understand exactly who their customers are and who
     their funds are coming from. These standards have made it difficult for individuals to send
     remittances from the United States to other countries. According to the World Bank, there
     were $554 billion in remittance flows worldwide in 2019.

     Summary of Joint Memorial: The Senate Joint Memorial requests that Congress
     implement strategies and recommendations put forward by the Government Accounting
     Office and the United States Treasury with legislation that includes:
        • provisions that give regulators clarity on how to improve examiners ability to



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                         SJM 8004
           evaluate banks' BSA/AML compliance as it is applied to money transmitter accounts;
         • requirements that financial institutions disclose specific reasons for closing accounts;
           and
         • assistance for financial institutions to mitigate the cost of due diligence required to
           comply with BSA/AML provisions impacting money transmitters.

     Appropriation: None.

     Fiscal Note: Not requested.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: This is a formal request to the federal
     government to take action on this issue. Common practice among immigrants here in
     Washington State is for them to send money home. A lot of banks do not want to take the
     risk having customers send money to what are considered to be high risk countries.
     Immigrant grocery stores have had their banks closed. Community organizations and
     Mosques have had their accounts closed. You need a bank account just to function in our
     society. When bank accounts are closed, no explanation is necessary let alone given under
     current federal statute and rules. Remittance is a lifeline to the families of people back
     home. Cutting this source of income off is a terrible thing for people struggling in third
     world countries. There are many jurisdictional challenges. While the Department of
     Financial Institutions (DFI) has been helpful, most of the rule changes they are providing
     only apply to state chartered banks. Many of the regulations DFI provides requires
     voluntary action. Under the inconsistent or non-existent de-risking regulations, many
     people in the state are suffering as a result. Twenty-five percent of licensed money
     transmitters are unbanked in the state of Washington. This is causing a public safety crisis
     for many immigrants in western Washington. Many stakeholders in the state have been
     working on this issue at the state level for a long time. Remittances serve an important
     humanitarian purpose. Citizens of this state should be able to send funds to their families.
     The National Defense Authorization Act has directed stakeholders at the federal level to
     take a closer look at this program. Access to banking would improve public safety. Many
     of these money transmitters have not been able to apply for COVID-19 relief due to the lack
     of a banking account.

     OTHER: The financial institutions are subject to many federal regulations, and have no
     flexibility in how they respond to the regulations. The banking industry acknowledges the
     concerns and think they are important, but their hands are tied.

     Persons Testifying: PRO: Senator Bob Hasegawa, Prime Sponsor; Roble Musse, The
     Right To Be Banked Campaign; Brianna Auffray, CAIR Washington; Alizeh Bhojani,
     OneAmerica; Drew Bouton, Washington Department of Financial Institutions.


Senate Bill Report                             -2-                                       SJM 8004
     OTHER: Trent House, Washington Bankers Association.

     Persons Signed In To Testify But Not Testifying: No one.




Senate Bill Report                         -3-                  SJM 8004


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