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AML Developments – FDIC Announces That It Will End Its Supervisory Trend of Expecting Regulated Institutions to 'De-Risk' Entire Categories of Customers

On Jan. 28, 2015, the Federal Deposit Insurance Corporation (FDIC) in a Financial Institutions Letter (FIL) announced that it would, in effect, do an about-face on its supervisory expectation that banks strongly consider discontinuing the provision of financial services to entire categories of certain purportedly high-risk customers. These categories of customers included, to name a few, non-U.S. companies, online gambling-related operations, online lenders, pharmaceutical sales, telemarketing entities, coin dealers, firearm and ammunition sellers, and even dating services.

The Letter now makes clear that banks regulated by the FDIC, in determining whether to continue – or discontinue – a specific customer relationship, may make that determination based on an individualized case-by-case risk analysis (something bankers have long advocated), as opposed to kicking out an otherwise profitable and risk management-sound customer from the bank simply because that customer happens to be in an industry that a regulator had deemed to be high-risk. But for the U.S. House of Representatives Committee on Oversight Report from Dec. 8, 2014 investigating the FDIC’s handling of “Operation Choke Point,” the FDIC’s FIL might very well never have seen the light of day.

According to that Report, “FDIC, in cooperation with the Justice Department, made sure banks understood — or in their own language, ’got the message’ — that maintaining relationships with certain disfavored business lines would incur enormous regulatory risk.” The FDIC has now reversed course, recognizing that it “is aware that some institutions may be hesitant to provide certain types of banking services due to concerns that they will be unable to comply with the associated requirements of the Bank Secrecy Act (BSA).” Under the new FDIC approach, FDIC-regulated banks are encouraged to “take a risk-based approach in assessing individual customer relationships rather than declining to provide banking services to entire categories of customers . . . .”

Financial firms – not just those examined by the FDIC – should be hopeful that the supervisory position of the FDIC expressed in the FIL might spill over to the other federal functional regulators, marking  the start of a shift away from industry “de-risking” (and closing the accounts of) entire customer classes and, in its place, restoring reliance on robust know-your-customer or KYC practices, where bankers’ reasoned judgments regarding whether they know a specific customer should be entitled to supervisory deference.

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About this Author

Carl Fornaris, Greenberg Traurig Law Firm, Miami and Washington DC, Finance and Corporate Law Attorney

Carl A. Fornaris is an attorney in firm's Financial Regulatory and Compliance Practice. With 24 years of legal experience, Carl advises banks and their holding companies, investment advisers, securities broker dealers, gaming firms, money services businesses and other financial institutions on all aspects of their business. These include  licensing, capital-raising transactions, acquisitions and divestitures, USA PATRIOT Act/BSA/AML compliance and OFAC sanctions programs (including permissible financial activities in Cuba), critical examination reports and enforcement...

Jennifer H. Weddle, Greenberg Traurig Law Firm, Denver, Tribal, Finance, Environment and Energy Litigation Law Attorney

Jennifer Weddle is the Co-Chair of the firm's American Indian Law Practice and has wide-ranging experience in complex regulatory and jurisdictional issues, with a focus in Indian law, handling a variety of matters for tribal and non-tribal clients. She has a dynamic, inter-disciplinary practice that centers on providing solutions for complex jurisdictional problems. Much of her practice focuses in the areas of tribal economic development and natural resources development. Jennifer also has U.S. Supreme Court experience, including serving as one of the attorneys for the respondent in Nevada v. Hicks (2001) and representing the petitioners in Ute Mountain Ute Tribe v. Padilla (2012) and Grand Canyon Skywalk Development, LLC v. Grand Canyon Resort Corporation (2013) and cert stage amici in Saginaw-Chippewa Tribe v. NLRB (2016) and amici on the merits in Lewis v. Clarke (2017).

Jennifer's work also includes negotiations for mineral leasing employment matters and representation before federal agencies. She has also been involved in civil litigation, working on numerous complex federal, state and tribal litigation matters, including class action tort litigation and large commercial disputes. Jennifer also has securities litigation experience and products liability litigation experience, and her transactional experience includes oil and gas renewables projects throughout the west, as well as Endangered Species Act work.

Jennifer has broad trial and appellate litigation experience (more than 40 trials), and frequently litigates jurisdictional issues. She is also experienced in sovereign models for consumer lending and energy development. Jennifer frequently assists tribes, banks and non-bank entities with financing and regulatory matters with Indian law components.

Jennifer has significant project siting experience, including the application of NEPA, NHPA, and other environmental laws on tribal and public lands, including with respect to large linear multi-state energy and infrastructure projects.

Jennifer is a proven problem-solver with significant transactional, regulatory and litigation experience involving very complex matters with both legal and policy components.


  • Litigation

  • Indian/Native American law

  • Environmental and natural resources

  • Oil and gas

  • Tribal energy development

  • Securities litigation

  • Alternative dispute resolution

  • Consumer finance

  • Financial institutions