House Subcommittee Holds Hearing on Derisking

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February 20, 2018

The effect of derisking on nonprofit organizations (NPOs) was raised during the first of what is hoped to be several Congressional hearings on derisking was held by the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee on February 15.

Titled “Examining De-Risking and Its Effect on Access to Financial Services” the hearing centered largely on Operation Choke Point, a former government program that resulted in the closure of accounts of businesses in a handful of sectors, including payday lenders and gun dealers. Two members of the subcommittee, however, specifically addressed how derisking has impacted NPOs and consequently, the delivery of humanitarian aid.

Rep. Keith Ellison (D-TX) formally introduced statements submitted by Charity & Security Network, the Global Center on Cooperative Security, and John Byrne, formerly of the Association of Certified Anti-Money Laundering Specialists and the co-facilitator of a multi-stakeholder dialogue on derisking and NPOs.

Ellison also noted that sudden and unexplained account closures continue to create serious problems for international charities and the people they serve. He cited an example of the closure of an international humanitarian organization’s account by Western Union on January 29 without explanation and asked what can be done to address this situation. One of the witnesses, Jason Oxman of the Electronic Transactions Association, responded that this is an example of the impacts of derisking, adding, “charities should not be targeted.”

Rep. Al Green (D-TX) cited data from the Charity & Security Network report on derisking and NPOs, noting that 2/3 of all U.S.-based organizations have problems with banking, and 37% have faced delays in wire transfers, asking why this is happening. Oxman responded that “charitable giving is at the heart of who we are as a country,” adding that the inability to transfer charitable funds is one of the unfortunate consequences of derisking. “We need to allow charitable organizations to access financial services and do good work,” he said.

Several witnesses noted the need for government agencies to coordinate their efforts so that banks do not receive multiple and often contradictory messages regarding their regulatory expectations. This sentiment was echoed by the subcommittee’s chairman, Rep. Blaine Leutkemeyer (R-MO) in his closing remarks.

Subcommittee staff intend to focus the next hearing, to be held in mid- to late-March, on correspondent banking.

View the recording of the full hearing