The risk category¶

A charity working in a country on a high-risk list applies for a bank account and is declined. So is the next one. Neither was assessed individually, and neither had to be, because the assessment is the expensive part and the answer was settled by the category they arrived in.

The European Banking Authority named this in January 2022. Where an institution refuses to enter into, or terminates, business relationships “with individual customers or categories of customers associated with higher ML/TF risk”, that is de-risking. The Opinion is careful about which half is the problem. Ending a particular relationship may be perfectly lawful. What the EBA calls unwarranted is de-risking “of entire categories of customers, without due consideration of individual customers’ risk profiles”, which it treats as a sign that the risk management is not working rather than that it is working hard.

The clerk’s brief¶

July 2025: The new authority opens, with a different remit¶

The Authority for Anti-Money Laundering and Countering the Financing of Terrorism began operations in 2025 from a seat in Frankfurt am Main, tasked with coordinating national authorities, directly supervising high-risk entities and writing the technical standards for the new rulebook. The clerks record what its own account of its mandate contains, and note that financial inclusion and de-risking are not in it.

March 2023: Guidelines against the practice¶

The EBA issued Guidelines on ML/TF risk management and access to financial services on 31 March 2023, requiring institutions to weigh the options before refusing a customer and to consider the individual risk profile rather than the class. The clerks observe that the remedy for a category applied instead of an assessment is an instruction to carry out the assessment, and that the arithmetic which made the assessment unattractive is left where it was.

January 2022: The Authority puts a name to it¶

Opinion EBA/Op/2022/01 of 5 January 2022 set out the definition, the affected groups and the drivers, following information gathering across all competent authorities in the Union during 2020 and 2021. It found the practice unwarranted where whole categories are refused without consideration of individual profiles, and identified the cost of compliance exceeding profits as one of the reasons institutions do it. The clerks note that the Opinion is addressed to competent authorities, the Commission and the co-legislators, and that the parties whose accounts were refused are its subject rather than its audience.

Union anti-money laundering law is built on looking at the customer in front of the institution. The category is what gets used when nobody looks. Of the three drivers the Opinion lists, risk beyond appetite, a lack of “the relevant knowledge or expertise to assess the risks associated with specific business models”, and cases “where the real or expected cost of compliance exceeds profits”, the third does the work. The customer is refused for being unprofitable to find out about, and is never a party to the sum.

The categories it names include asylum seekers from high-risk jurisdictions and not-for-profit organisations, alongside respondent banks, payment institutions and electronic money institutions. What they share is paperwork that is hard to check cheaply: trustees for beneficial owners, identity documents from a listed state, a business model the compliance department has not met. Difficulty of assessment and probability of wrongdoing are different quantities. The practice does not tell them apart.

The rights collide on the way out. Article 19(4) of the Payment Accounts Directive gives a consumer whose basic account is closed the grounds for it, and the anti-money laundering rules forbid “tipping-off”. The right to an account in Article 16 “applies only to the extent that institutions can comply with their AML/CFT obligations”, and “no clarification is provided on the interaction”. Reasons do exist. Under Article 36 of the second Payment Services Directive a bank refusing a payment institution “shall provide competent authorities with duly motivated reasons for any rejection”. They are written down and delivered. To the regulator.

Where the file leaves it¶

Three instruments in this file give a customer rights: to an account, to reasons for its closure, to non-discriminatory access. Each is drafted for somebody an institution has engaged with and then turned down. The practice the file describes works earlier than that, by declining to engage, and by settling the question at the level of the class so that no individual case is ever opened. The clerks’ standing assessment is that the cheapest moment to refuse somebody is before they become a case, and that nothing in this file reaches that moment.