World of changers: - Compliance Measures

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HSBCWorld tendency of financial markets changes constantly. Situation with the banks isn’t exceptional, banking system is under transformation as well. Primarily changers relate to the reformation of procedures and rules with customers. Some banks change their lists of ‘acceptable’ customers by imposing restrictions for servicing non-resident customer and by limiting list of accepted countries for the opening corporate bank accounts. There are almost no banks within Europe, accepting corporate clients from the ‘Tax havens’. But this might be just the beginning; we can see that bank rules are becoming stricter, including enforcements for closing bank account for existing customers. Recently, worldwide compliance measure has cost HSBC bank a staggering $1.92 bn. The cost was imposed by the US authorities last year after allegations of money laundering via drug cartels in Latin America. In wake of their compliance errors, the bank is now calling the closure of more than 40 diplomatic missions to close their accounts in order to reduce its business risk and being refined or have the accounts seized by local authorities. Even though, top administration from the UK Consular have tried to assist diplomats in opening other accounts, it seems the compliance measures have been also widely implemented from other banks creating havoc for Diplomats. It is also reported that the Vatican’s ambassadorial office in Britain is among the affected. HSBC has comment on its actions, as the need for compliance does not exempt any government body. All bodies must comply with five criteria’s: international connectivity, economic development, profitability, cost efficiency and liquidity. The implementation of the measures has come to a wake from all banks after fines and seizures from local and international bodies over throw the ability to profit of non-compliance measures. Therefore, banks now prefer to just comply as the risk (business risk) vs profit for shareholders is not cost effective for banks to take these risks. Unfortunately, experience of our company is proving the trend: some clients being existing customers of reputable banks for a while, were recently asked to close their accounts without receiving sufficient explanatory notification. We are now observing the period of transformation and we need to be aware of world trends.