Engrossed Senate Joint Memorial 8005 — De-Risking and Money Transmitters (Washington, 2023)

Summary

Engrossed Senate Joint Memorial 8005 of the State of Washington, 2023 Regular Session, sponsored by Senators Hasegawa and Wilson. It was read first time on January 24, 2023 and referred to the Committee on Business, Financial Services, Gaming & Trade. The memorial petitions the President of the United States and Congress and recites that many immigrants to Washington send remittances to family abroad, that Bank Secrecy Act and Anti-Money Laundering rules impose compliance requirements on financial institutions, and that many financial institutions appear to be engaging in de-risking. It recites that local or community-based money transmitters have had accounts closed, and that copies are to be transmitted to the President and each member of Congress from the State of Washington.

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                      ENGROSSED SENATE JOINT MEMORIAL 8005


     State of Washington        68th Legislature        2023 Regular Session

     By Senators Hasegawa and C. Wilson

     Read first time 01/24/23.       Referred   to   Committee   on   Business,
     Financial Services, Gaming & Trade.




 1       TO THE HONORABLE JOSEPH R. BIDEN, JR., PRESIDENT OF THE UNITED
 2   STATES, AND TO THE PRESIDENT OF THE SENATE AND THE SPEAKER OF THE
 3   HOUSE   OF   REPRESENTATIVES,   AND  TO   THE   SENATE   AND HOUSE   OF
 4   REPRESENTATIVES OF THE UNITED STATES, IN CONGRESS ASSEMBLED:
 5       We, your Memorialists, the Senate and House of Representatives of
 6   the   State   of   Washington,   in   legislative   session  assembled,
 7   respectfully represent and petition as follows:
 8       WHEREAS, The State of Washington welcomes refugees and immigrants
 9   who bravely leave behind everything familiar to seek safety, build a
10   better life, and provide resources for loved ones in their country of
11   origin; and
12       WHEREAS, Approximately one in every seven Washington residents is
13   an immigrant and another one in every seven Washington residents is a
14   native-born United States citizen with at least one immigrant parent;
15   and
16       WHEREAS, Many immigrants to Washington transfer money to loved
17   ones in their country of origin in the form of remittances, and money
18   remitted by migrants competes with international aid as one of the
19   largest financial inflows to developing countries; and
20       WHEREAS, Many immigrants have continued to try to send money to
21   their    families    despite   uncertain    and   changing   employment
22   circumstances following the COVID-19 pandemic and recovery; and


                                      p. 1                            ESJM 8005
 1       WHEREAS, The federal government has national security interests
 2   that have resulted in measures by federal agencies to block
 3   remittances that present significant security risks, and the federal
 4   Bank Secrecy Act and related Anti-Money Laundering rules (BSA/AML)
 5   impose due diligence, recordkeeping, reporting, and compliance
 6   program requirements on financial institutions with respect to
 7   remittances to foreign countries; and
 8       WHEREAS, Some of the countries to which immigrants to Washington
 9   want to remit money have little or no central banking infrastructure,
10   which makes compliance with BSA/AML rules difficult or impossible,
11   and prevents immigrants from being able to remit money in a safe,
12   reliable manner; and
13       WHEREAS, Financial institutions such as banks and credit unions
14   play a pivotal role in facilitating commerce and enabling individuals
15   to build financial prosperity; and
16       WHEREAS, Many of the local or community-based money transmitters
17   that service underserved diverse communities in Washington have been
18   excluded from obtaining or maintaining accounts from traditional
19   financial institutions and have seen their accounts closed without
20   explanation or justification, leaving underserved communities without
21   banking options; and
22       WHEREAS, Many financial institutions appear to be engaging in de-
23   risking, whereby they terminate or restrict business relationships
24   with clients or categories of clients in order to avoid, rather than
25   manage, risk; and
26       WHEREAS, De-risking has detrimentally impacted the ability of
27   smaller, Washington-based money transmitters to serve underserved
28   diverse communities, to the benefit of larger money transmitters that
29   operate on a nationwide basis; and
30       WHEREAS, De-risking also presents a threat to public safety, as
31   unbanked businesses often must store and transport large sums of cash
32   at great risk to owners and their employees; and
33       WHEREAS, The state of Washington has an interest in promoting
34   financial inclusion and in ensuring that every individual or business
35   operating in compliance with the law can access regulated financial
36   systems; and
37       WHEREAS, The federal National Defense Authorization Act (NDAA)
38   for fiscal year 2021 expresses Congress's sense that "anti-money
39   laundering, countering the financing of terrorism, and sanctions
40   policies must ensure that the policies do not unduly hinder or delay
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 1   legitimate access to the international financial systems for
 2   underserved individuals, entities, and geographic areas;" and
 3       WHEREAS,   The  NDAA   directed  the   United  States   Government
 4   Accountability Office (GAO) to analyze financial services de-risking
 5   and report to Congress, and directed the United States Department of
 6   Treasury and others to review reporting requirements now in effect
 7   and propose changes to reduce unnecessarily burdensome regulation and
 8   to develop a strategy to reduce de-risking and related adverse
 9   consequences; and
10       WHEREAS, The United States Department of Treasury issued their
11   report on April 25, 2023, "The Department of the Treasury's De-
12   Risking Strategy" with key findings and recommendations that include
13   promoting consistent supervisory expectations that consider the
14   impacts of de-risking; proposing regulations that require financial
15   institutions to have reasonably designed and risk-based AML/CFT
16   programs supervised on a risk basis, taking into consideration the
17   effects of financial inclusion; and building on Treasury's work to
18   modernize the United States sanctions regime and its recognition of
19   the need to specifically calibrate sanctions to mitigate unintended
20   economic, political, and humanitarian impacts, as outlined in The
21   Treasury 2021 Sanctions Review; and
22       WHEREAS,   The    Washington   state   department   of   financial
23   institutions has worked with representatives of local and community-
24   based money transmitters, banks, and credit unions in Washington to
25   develop enhanced regulatory guidance and a model account agreement to
26   clarify expectations for financial institutions that might offer
27   account services to affected money transmitters; and
28       WHEREAS,   The    Washington  state    department   of   financial
29   institutions has forwarded that guidance to federal bank and credit
30   union regulators for their review and comment in 2022; and
31       WHEREAS, Collaboration between federal bank and credit union
32   regulators,   the    Washington   state   department    of   financial
33   institutions, and industry stakeholders could lead to significant
34   progress towards rolling back blanket de-risking by depository
35   institutions with respect to local and community-based money
36   transmitters;
37       NOW, THEREFORE, Your Memorialists respectfully pray that:
38       (1) Congress pass and the President sign legislation implementing
39   strategies and recommendations that result from:


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 1       (a) Reports by the GAO and the Treasury Department in response to
 2   the NDAA; and
 3       (b) Review of the Washington state department of financial
 4   institutions' regulatory guidance for depository institutions;
 5       (2) Such legislation also include:
 6       (a) Directives to federal financial regulatory agencies to
 7   develop regulations that clearly and specifically require financial
 8   institutions to have reasonably designed and risk-based AML programs
 9   supervised on a risk basis, taking into consideration the effects of
10   financial inclusion;
11       (b) Provisions giving federal banking regulators clarity on how
12   to improve examiners' ability to evaluate banks' BSA/AML compliance
13   as applied to money transmitter accounts;
14       (c) A requirement that financial institutions disclose a specific
15   reason when denying or closing an account; and
16       (d) Provisions to help financial institutions mitigate the cost
17   of due diligence required to comply with BSA/AML provisions impacting
18   money transmitters; and
19       (3) The President direct federal bank and credit union regulators
20   to   work  with   the   Washington  state  department  of   financial
21   institutions and industry stakeholders to support efforts to develop
22   new and creative solutions to improve banking access for local or
23   community-based money transmitters.

24       BE IT RESOLVED, That copies of this Memorial be immediately
25   transmitted to the Honorable Joseph R. Biden, Jr., President of the
26   United States, the President of the United States Senate, the Speaker
27   of the House of Representatives, and each member of Congress from the
28   State of Washington.

                                  --- END ---




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