BOGOTA, March 15 (Reuters) - Excessive U.S. regulations on foreign financial entities are leading their banks to close credit lines to Latin American banks, making it harder and more expensive to pay for foreign trade operations in the region, the head of financial association, Felaban, said on Tuesday.
Requirements demanded from the international financial sector by U.S. authorities have intensified in recent years as they seek to contain money laundering that fuels drug trafficking and terrorist activities.
But even as regional banks have aligned with controls imposed by the Financial Action Task Force on Money Laundering (FATF), there is a misperception of risk by the United States, Jose Manuel Lopez, president of the Federation of Latin American Banks (Felaban), told Reuters.
“There’s been a closure of accounts, not because there’s money laundering but because the cost of regulations is exacerbated, making profitability of the operation unattractive, so they prefer to close the account,” Lopez said.
Additional costs include increased staffing and technology deployment.
“What’s needed is discussions on specific points that allow the implementation of agreements between U.S. and Latin American regulators and banks to find concrete solutions to the problem, because closing such accounts causes problems for import and export payments,” he said.
Over regulation has provoked an increase in informal, unregulated financing mechanisms -- promoted on the internet or in the press -- offering financing with lax conditions.
“Regulating is a difficult art,” said Lopez. “It’s like a belt. If it’s placed the right way, the pants don’t fall down, but if it’s tightened too much it restricts breathing.” (Writing by Helen Murphy; Editing by Sandra Maler)