An article in Foreign Affairs by former investment banker Tom Keatinge uncovers how counterterrorism regulations make banks more willing to close “risky” accounts, such as remittance services and some nonprofits. Since 9/11, efforts by the U.S. and the international community to stop the flow of money to terrorist groups has led to banks having “prime responsibility for securing the national and international financial borders.”

The impact of this trend was most visible when Barclays UK closed the accounts of the Money Services Businesses (MSBs) used by many diaspora communities to send remittances. Barclays and other banks like HSBC and the Merchants Bank of California were concerned that stiff penalties (in the order of billions of dollars) could be imposed on them for failing to adequately ensure their accounts were not being used for terrorist financing purposes. Meanwhile, countries like Somalia, “which receives more money from remittances than it does development aid” were cut off from a vital resource.

Ironically, as Keatinge points out, “restrictive regulations have simply pushed large pools of funds outside formal channels—encouraging criminals and terrorists to finance their activities in the shadows.”

More about the closure of MSBs can be found here.