De-risking and de-banking: Implications for Financial Inclusion

Abstract

In this opinion piece, I unravel the nature, causes and effect of de-risking and de-banking and the implications for financial inclusion. De-banking removes people from the formal financial system against their own will by closing their account while de-risking restricts access to bank accounts which creates inconvenience and dissatisfaction. When banks de-risk and de-bank banked adults, their livelihoods, relationships, reputation, and access to essential banking services can evaporate or disappear immediately. Over time, de-risking and de-banking will push people outside the formal financial system and lead them to rely on the informal financial sector which would make financial inclusion efforts counterproductive. I argue that while there may be legitimate reasons for de-risking and de-banking banked adults, such actions, if excessive, wrongful and discriminatory, can have adverse consequences for financial inclusion. I suggest three remedies for combatting de-risking and de-banking. They include using regulation to limit banks’ discretion to de-risk and de-bank people, urging banks to implement FATF’s 2025 guidance on financial inclusion and anti-money laundering and terrorist financing measures, and using regulation or legislation to ensure that the right to own a fully operational bank account supersedes the right of a bank to restrict or close a bank account.

Keywords

de-banking de-risking financial inclusion account closure account restriction

Introduction

In this opinion piece, I explore the nature, causes and effect of de-risking and de-banking and the implications for financial inclusion. I argue that the practice of de-risking and de-banking – which entails closing and restricting accounts – should be discontinued. If this is not possible, I then argue that, at least, the power of banks to de-risk and de-bank banked adults should be limited due to its adverse effect on financial inclusion. I call on policymakers to step in to limit the discretion of banks to de-risk and de-bank banked adults.

This is an important issue because, on a global scale, de-risking and de-banking are not a neutral regulatory instrument applied uniformly across the global financial system. It disproportionately affects developing countries and small developing states by curtailing their access to international financial markets, constraining economic participation, and impeding growth and development. On a micro-level, it gives banks the power to de-risk and de-bank any individual it deems to be a ‘bad actor’, thereby affecting the progress being made to increase the level of financial inclusion.

Before making my extensive arguments, I will first show that the causes of de-risking and de-banking can be traced to financial impropriety in the banking sector, financial regulatory convenience, and the international powerplay by regional powers supported by intermediary banks and FATF. Thereafter, I will concentrate on the consequences of de-risking and de-banking for financial inclusion. I choose to emphasize the implications of de-risking and de-banking for financial inclusion because I believe this is a particularly promising direction for future research which has the potential to transcend the de-banking and financial inclusion literatures and influence thinking in the wider community of banking and financial development academics and policy makers.

It is a well-established fact that there are increasing reports and complaints of account restrictions and closures without prior notice in the banking industry (Styles, 2026; D’Hulster et al., 2023; Ramachandran et al., 2018; Zywicki, 2025). These de-risking and de-banking incidents are not isolated events. The origin of these incidents can be traced back to the 9/11 terrorist attack on the World Trade Center, the development of strong post-9/11 counter-terrorism financing regulations, and the role of Financial Action Task Force (FATF) as a global monitor to identify countries that are at risk of being blacklisted or greylisted due to their links to illicit financial flows, and the role of intermediary banks in the de-risking and de-banking process.

The need to de-risk and de-bank customers predates the global financial crisis (see, for example, Bester et al., 2008). It gained momentum after the 9/11 terror attacks and gained further momentum after the 2007-8 global financial crisis when new financial regulatory standards emerged requiring financial institutions to combat illicit financing by monitoring client account activity to detect suspicious activities and ensure compliance with anti-money laundering, countering the financing of terrorism and countering proliferation financing (AML/CFT/CFP) regulations (Collin et al., 2015).

These standards, developed by FATF, gave financial institutions the option to de-risk and de-bank any client or customer whose account activity or business makes it difficult for the financial institution to comply with local AML/CFT/CFP regulations (Collin et al., 2015; De Koker & Casanovas, 2024; Styles, 2026). These standards ushered in the era of de-risking and de-banking which we are witnessing today. However, the design of the global financial regulatory architecture often favours developed countries by giving them preferential access to international financial markets while curtailing developing countries and small developing states’ access to international financial markets, constraining their economic participation, and impeding their growth and development. Such financial regulatory architectural design also affects individuals at the micro-level when banks restrict or close accounts without notice, thereby increasing financial exclusion.

The insights offered in this opinion piece contributes to the financial inclusion literature that explore the causes of financial exclusion and strategies for accelerating financial inclusion (Ozili, 2018, 2021), but which have not considered de-banking to be a potential cause of ‘forced’ financial exclusion. This opinion piece contributes to this literature by showing that de-risking and de-banking are potential sources of financial exclusion and proffering useful strategies to combat de-risking and de-banking to increase financial inclusion. The opinion piece further contributes to the risk management literature that explore several approaches to mitigate risk in business. It contributes to this literature by showing that de-risking and de-banking are strategies for mitigating client-specific risk in the banking system.

The rest of the manuscript is organised as follows. Section 2 presents the foundations of de-risking and de-banking. Section 3 discuss the implications of de-risking and de-banking for financial inclusion. Section 4 recommends some remedies or strategies for combatting de-risking and de-banking to preserve the level of financial inclusion. Section 5 concludes the opinion piece.

Foundations of de-risking and de-banking

What Is de-risking and de-banking?

De-risking is the restricting of banking relationships with clients. It occurs when a bank restricts access to banking services to a client who is financially included (De Koker & Casanovas, 2024; D’Hulster et al., 2023). It is a proactive risk management strategy by financial institutions to eliminate or reduce overall risk exposure (De Koker & Casanovas, 2024). De-risking is often caused by the need to comply with regulation, such as anti-money laundering or terrorist financing regulations, and to avoid penalties and reputational damage that come with failing to comply with such regulations (D’Hulster et al., 2023; De Koker & Casanovas, 2024). The aim of de-risking is to restrict services to clients, not necessarily to close accounts or end a banking relationship with a client.

De-banking, on the other hand, is the closing of the formal account of banked adults against their will by their bank. De-banking occurs when a bank denies or terminates access to banking services to a client who is financially included, leading to the closing of the client’s bank account. De-banking may occur due to concerns about risk management or regulatory compliance (De Koker & Casanovas, 2024), or due to banked adults expressing ideologies or political views which the bank finds to be incompatible with existing regulations, ideologies, or political views.

Theoretical Perspectives on de-risking and de-banking

De-risking and de-banking are supported by existing theories. For instance, risk management theory, developed by Nocco and Stulz (2006) and Pyle (1999), posits that businesses (including banks) will constantly identify potential risks affecting their business, assess their likelihood and impact, and develop strategies to mitigate the identified risks (Nocco & Stulz, 2006). The implication of the theory is that if a client’s account activity is a source of significant risk to a business or a bank, the rational decision of the business or bank will be to mitigate or eliminate that risk by restricting or closing its business relationship with the customer or client.

The public good theory of financial inclusion opposes the idea of de-risking and de-banking a client. The theory posits that access to a bank account and access to basic financial products should be treated as a public good, meaning that access to a deposit account or a savings account should be granted to everyone without discrimination (Ozili, 2020). The implication of the theory is that everyone, including good and bad economic agents, should have access to basic banking services without any bias. Accordingly, this theory opposes de-risking and de-banking of bank customers.

Review of Relevant Literature

The existing literature explored the nature of de-risking and de-banking. Bester et al. (2008) show that AML/CFT de-banking predates the global financial crisis. They show instances of the de-banking of money services businesses (MSBs) in the U.S. due to money laundering and/or financing terrorism concerns in 2004 to 2005.

The FATF (2011) offered recommendations aimed at taking action against financial crime and ensuring the integrity of the financial system. The key element of the recommendations is that countries will now have to identify, assess and understand their money laundering and terrorist financing risks as part of the risk-based approach to allow them to better respond to these risks. The recommendations also provide measures that help to identify the real people behind legal persons and transactions and also provide measures to deal with those individuals that have prominent positions in government or large international organisations and who, because of their powerful positions and access to funds, are susceptible to corruption (FATF, 2011).

Ramachandran et al. (2018) show that de-risking and de-banking are the natural consequence of countries attempting to frustrate money launderers, those who finance terror and those who undermine international sanctions programmes. However, they emphasised that de-risking and de-banking was not the primary intention of such policy effort. Moore and Scott-Joseph (2025) and Charles (2022) show that the post-global financial crisis de-risking by banks was due to rising regulatory burdens, compliance costs, reputational risks and profitability concerns linked to anti-money laundering and combating the financing of terrorism (AML/CFT) regulations as reasons for de-risking customers. De Koker and Goldbarsht (2024) show that the introduction of risk-based approach in the FATF standards in 2012, which aimed to empower banks to manage their financial crime risks individually, led to unintended consequences. It burdened smaller financial institutions that have insufficient resources to undertake appropriate financial crime risk assessments, and it also led to perverse unintended consequences that regulators were unable to effectively prevent.

Zywicki (2025) shows that de-banking can happen for political reasons with examples including the Barack Obama Administration which de-banked individuals in disfavoured industries under the guise of ‘reputation risk’ and the Biden Administration which targeted individuals like Melania Trump and Michael Flynn with account closures for their political stances. Similarly, Hill (2026) shows evidence of governmental de-banking when government bank regulators forced banks to close accounts of crypto customers. Dahdal (2024) shows that immigrants are considered to be ‘high-risk’ clients in Australia, and existing financial regulations prevent digital assets service providers from serving high-risk’ clients, meaning that immigrants will either be de-banked or will be restricted from accessing digital asset and related services.

De Koker and Casanovas (2024) show that the decision of banks in South Africa to terminate or restrict relationships with customers and counterparts is due to the overly-conservative design of anti-money laundering and counter terrorist financing measures of South African banks. The conservative measures made it difficult for banks to explore other methods of resolution other than the termination or restriction of relationships with customers and counterparts. Styles (2026) shows that de-banking in the United Kingdom, New Zealand and Australia is in response to AML/CTF regulations, and that many financial institutions have been successful in defeating legal challenges to de-banking by clients.

Grima et al. (2020) interview individuals knowledgeable about the de-risking process in Malta to understand the challenges associated with de-risking. They show that the respondents stated that banks need to find the balance between adequately managing risks without extinguishing the business needs of clients in the guise of de-risking. Durner and Shetret (2015), in a report investigating the effect of de-risking, find that de-risking may not reduce risk in the global financial sector, rather it can increase vulnerability by pushing high-risk clients to smaller financial institutions that lack adequate AML/CFT capacity, or even push them out of the formal financial sector.

In a recent Pacific Island Forum report, D’Hulster et al. (2023) note the continued withdrawal of correspondent banking relationships in the Pacific, also known as “de-risking”, and recommend actions for combatting de-risking for Pacific Island countries. They show that de-risking, in response to anti-money laundering (AML), combating of financing of terrorism (CFT) and proliferation financing (CPF) concerns, leads to fewer and lesser quality correspondent banking relationships, it hampers remittances, it prevent segments of the population from efficiently accessing the financial system, it can delay the transfer of international development funds and humanitarian and disaster relief, it can also drive financial activity out of the regulated financial system into informal channels. They recommend that Pacific Island countries should work collaboratively to adhere to global financial standards relating to financial integrity.

Collin et al. (2015), in a Centre for Global Development report, show that governments are taking steps to address money laundering, terrorism financing and sanctions violations offenses by individuals, banks and other financial entities to increase the safety of the financial system and improve security, both domestically and around the world. However, they acknowledge that the policies that have been put in place to counter financial crimes may also have unintentional and costly consequences, in particular for people in poor countries, as banks may engage in “de-risking” by ceasing to engage in types of activities that are seen to be higher risk in a wholesale fashion, rather than judging the risks of clients on a case-by-case basis.

Regarding the impact of de-banking, De Koker et al. (2017) examine the impact of closure of bank accounts of members of migrant communities who rely on independent community-based remittance providers in Australia. They focus on the policy and legal challenges affecting them. They assess the views of members in the African migrant communities in Melbourne about account closures and find that the lack of community engagement by regulators and banks foster increased social exclusion of members of affected migrant communities. The authors argue for the need of active engagement of the affected communities with banks and regulators to understand the risks relating to account closures and to find appropriate solutions to protect individuals, community, and public interests at stake.

Some studies show that de-banking also affect non-profit organizations (NPOs). Nguyen (2025), in a case study, shows that NPOs such as Merciful Group Incorporated (Merciful) was de-banked by other banks including St George, ANZ, HSBC, Arab Bank of Australia, Australian Mutual Bank, and Bank of Sydney due to large transactions that are unusual to Merciful’s customer profile, transactions made to or from a high-risk jurisdictions, and irregular transaction patterns. Emile Van Der Does De Willebois (2017), in a world bank blog post, raises concern about the de-banking of non-profit organizations (NPOs) due to the mistaken and persistent idea that all NPOs pose a high AML/CFT risk especially when they pursue a human right cause or other causes that are deemed by local authorities to be political in nature. NPOs continue to face problems accessing financial services ranging from account opening refusals, delays in wire transfers and increased fees, etc. These restrictions force NPOs to move money through less transparent, traceable, and safe channels.

International Powerplay, Intermediary Banks, FATF and Development Effect of de-risking and de-banking

De-risking and de-banking are not only a financial regulatory phenomenon as shown in the review of existing literature in the previous section, its cause can also be traced to the international or geopolitical powerplay that disproportionately elevates developed countries and gives them preferential access to international financial markets to the detriment of developing countries and small developing states (Fugazza & Nicita, 2013). This power asymmetry often manifests when developing countries and small developing states are barred from accessing international financial markets, or when they are granted access to international financial markets on unfavourable terms for failing to comply with the social, political, human rights, or economic changes or reforms demanded by powerful developed countries, such as the U.S., through their proxy multilateral institutions such as the OECD, the World Bank and the International Monetary Fund (Drezner, 2015; Ha & Thang, 2023; Perry & Peksen, 2024).

Such practices do not only restrict access to cheap international finance for developing countries and small developing states, it also constrains economic participation, limits their participation in the global economy, discourages foreign direct investment inflows, and impedes the growth and development of developing countries and small developing states (Mirkina, 2021; Nguyen & Ahmed, 2023). The developmental consequence is that it denies them access to cheap financing which could be used to build infrastructure that create jobs and improve the quality of education, healthcare and wellbeing for the population. Other studies, such as Gabor (2023), view de-risking from a different perspective, arguing that a de-risking State is a state that deploy private capital to achieve public policy priorities by tinkering with risk/returns on private investments in sovereign bonds, currency, green industries and social infrastructure.

Intermediary banks also play a role in the de-risking and de-banking process. Intermediary banks, which are supposed to connect developing countries’ domestic financial systems to the global economy, aid the de-risking and de-banking process by enforcing international sanctions imposed on developing countries by powerful nations by restricting their correspondent bank accounts, driving up transaction costs, increasing capital transfer costs and shrinking the number of available cross-border financial pathways for developing countries, thereby plunging the affected countries into economic chaos (Ahmad, 1976).

Furthermore, FATF, which was established by the G7 countries, also contribute significantly to rising incidents of de-risking and de-banking by issuing 40 recommendations which are binding on all countries including developing countries that did not make an input into their formulation. FATF mandates financial institutions to adopt a risk-based approach when identifying, assessing, and understanding financial crime risks, and urges them to apply compliance measures only where risks are high (FATF, 2021).

Although FATF does not directly mandate financial institutions to de-risk and de-bank high-risk clients, it indirectly ensures compliance with its 40 recommendations through the issuance of global monitoring lists which pressure countries to take targeted actions to exit its blacklist or greylist (FATF, 2021). The financial authorities of affected countries seeking to exit FATF’s blacklist or greylist will urge their financial institutions to de-risk and de-bank high-risk clients (FATF, 2021). This demonstrates how de-risking and de-banking have become the indirect unintended negative consequence of financial institutions adopting FATF’s 40 recommendations (FATF, 2021). The legitimacy of FATF’s recommendations may be challenged on grounds that its recommendations exert global influence without equal representation, they disproportionately burden developing countries, there is lack of democratic representation, lack of democratic accountability and lack of formal international judicial scrutiny of its recommendations (Otudor & Bagheri, 2024).

Benefits of de-risking and de-banking to Banks

Banks have incentives to de-risk and de-bank banked adults for several reasons. It enhances their reputation and improves risk management. It allows them to restrict or close the accounts of banked adults whose financial activities pose significant reputational damage or risk to banks. Two, it reduces banks’ compliance costs. Restricting or closing a high-risk client’s account will enable banks to avoid paying huge penalties for violating existing AMF/CFT regulations. Three, it improves bank operational efficiency. Banks can de-bank customers who are no longer profitable to the bank, particularly customers with dormant or inactive accounts or individuals who consume excessive administrative resources through frequent complaints.

Four, it enables banks to dissociate themselves from clients with questionable characteristics. For instance, banks can de-risk and de-bank clients that have a bad public reputation or clients affiliated with an undesirable institution or terrorist group (Styles, 2026). Five, it can offer political, moral, and ethical benefits to banks because they can de-bank customer accounts linked to a sanctioned industry or the sin industry if regulatory and political sanctions are imposed on the activities of the industry. For instance, banks will be forced to restrict or close all accounts affiliated with the crypto industry if regulators place sanctions on all crypto-related transactions. In summary, de-risking and de-banking are beneficial to banks because it helps to mitigate potential risks, ensure regulatory compliance, protect themselves from reputational damage, financial losses, and avoid regulatory penalties (De Koker & Casanovas, 2024).

Operation Choke Point: The American De-risking/de-banking Experience

While disproportionally affecting smaller and developing economies, de-risking and de-banking have also seen controversial implementation in large developed economies. One example in point is ‘Operation Choke Point’. Operation Choke Point was a de-risking initiative launched in 2013 by the U.S. Department of Justice (DOJ) (Anthony, 2025). The initiative aimed to investigate banks in the United States and the business they did with firearm dealers, payday lenders, and other companies that, while operating legally, were said to be at a high risk for fraud and money laundering (Stevenson, 2023).

Several studies, such as Stevenson (2023), show that the initiative put regulatory pressure on banks and discouraged them from providing financial services to businesses deemed high-risk or prone to fraud. This led to erratic de-risking of bank clients. Soon after, Operation Choke Point was criticised for illegally targeting legal, controversial industries such as licensed payday lenders, firearms dealers, and coin collectors using regulatory pressure (Stevenson, 2023). As a result, the DOJ formally ended the initiative in 2017. In recent years, US lawmakers have stated that Operation Choke Point was revived by federal agencies, such as the FDIC, to restrict banking access for legal cryptocurrency and energy companies, essentially de-risking crypto clients (Anthony, 2025).

Implications for Financial Inclusion

Banks Hold Profound Power to de-risk and de-bank Any Banked Adult Which Encourages Financial Exclusion

A banked adult is any person that has a formal account<sup>¹</sup> of any type which they use frequently to access essential banking services such as deposits, loans, mortgage, payments, insurance, etc. Banks possess the power to de-risk and de-bank any banked adult because most individuals and businesses need a banking relationship with a bank to access basic banking services. Almost every financial transaction goes through a bank directly or indirectly. This dependence on banks has several consequences for financial inclusion. An immediate consequence is that banks can decide when to restrict or terminate their banking relationship with any client and without apology after citing regulatory compliance, risk management or political association as reasons for de-risking and de-banking. When banks suddenly restrict or terminate their banking relationship with clients, it creates problems for affected individuals who may struggle to make or receive payments and manage their personal finance. It also creates problems for businesses who may find it difficult to pay employees, pay taxes and to make sales.

Devastating Effect on Banked Adults, Worsening Financial Exclusion

Although banks may have good reasons for de-risking and de-banking a banked adult, such de-risking and de-banking can have devastating effects on the affected banked adults. An immediate effect of de-risking and de-banking without notice is inconvenience which can evolve into emotional trauma and stress. It brings significant inconvenience to the affected banked adult because banks rarely provide clear explanations for their de-risking and de-banking decisions (Jelisejevs, 2023). Without clear explanations and transparency, the affected individuals are left confused, frustrated and do not know what they did wrong to prevent future occurrences.

Two, it brings immediate and lasting reputational damage to the affected individual because other banks may also deny access to banking services to the affected individual. Three, the affected individual could be cut off from essential banking services for a long time, which threatens their very survival. Four, de-risking and de-banking can damage the affected individual’s livelihood and relationship with family, friends and business partners.

A Setback on the Progress Being Made to Increase Financial Inclusion

De-banking is a setback for financial inclusion because there is a high risk of wrongful de-banking (Collin et al., 2015), especially when criminals hijack the formal accounts of vulnerable people and use their accounts to make illicit and suspicious financial transactions which, upon detection by banks, will lead to the closure of the accounts of vulnerable victims. This can lead to the financial exclusion of vulnerable people, making it difficult for them to access basic banking services, such as deposit accounts, credit, and payment processing services (Ozili, 2020). De-banking also adversely affects people living in remote, marginalized communities whose accounts may be closed for reasons unrelated to risk management, regulatory compliance or political associations. Their accounts may be closed due to prolonged account inactivity. This can lead to the financial exclusion of people in remote communities, making it difficult for them to access basic banking services.

Three, when more people are de-banked, they may have no other alternative but to increasingly rely on the informal financial sector to raise funds to sustain their livelihoods. This will increase the size of the informal financial sector and will be a setback for financial inclusion (Cama et al., 2024). Four, when people are de-banked, it leads to poverty and income inequality for affected individuals because it prevents them from accessing formal savings and credit products that will enable them to cope better with income and consumption shocks (Turegano & Herrero, 2018). Finally, the all-encompassing impact of de-risking on financial inclusion will remain difficult to assess due to the reluctance of affected customers to speak about the loss of financial access, coupled with the lack of empirical data on de-banked communities and their usage of financial services (Durner & Shetret, 2015).

Suggested Remedies

Limit Banks’ Discretion to De-Risk and De-Bank People

The power of banks to de-risk and de-bank banked adults needs to be limited, controlled or regulated to prevent abuse, discriminatory or wrongful bank account closures. It is necessary for policymakers to step in to limit the discretion of banks to de-risk and de-bank banked adults. Policymakers can intervene by issuing industry-wide regulation that clearly defines the acceptable grounds for de-risking and de-banking. This will help to prevent discriminatory or wrongful de-risking and de-banking merely on suspicion rather than based on proven evidence.

Two, policymakers should ensure that there is a transparent and standardised industry-wide de-risking and de-banking process that permits two-way communication between the bank and the affected customer before de-risking and de-banking takes place. This means that regulation should require banks to communicate to the affected customer the reasons for the de-risking or de-banking decision and banks should wait to receive a response from the client within a reasonable time before their accounts are restricted or closed.

Three, regulation should provide channels for appeal against a legitimate or wrongful decision to restrict or close a client account. Four, alternative source of financial services should be provided to affected customers so that the affected customers do not have to suffer or rely on the informal sector to raise funds to meet their basic subsistence needs while their accounts are being restricted and investigated.

Financial Authorities Should Urge Banks to Implement FATF’s 2025 Guidance on Financial Inclusion and Anti-Money Laundering and Terrorist Financing Measures

FATF, in 2025, updated its ‘Guidance on Financial Inclusion and Anti-Money Laundering and Terrorist Financing Measures’. Specifically, it modified Recommendation 1 of the FATF standards² to reinforce the expectation that the risk-based implementation of Anti-Money Laundering, Countering the Financing of Terrorism, and Counter-Proliferation Financing (AML/CFT/CPF) controls must support countries and the private sector’s effort to bring more people into the formal financial sector because financial inclusion and the fight against financial crime should be mutually supportive (FATF, 2025). Bringing more people into the formal financial sector can support ongoing efforts to combat financial crime, as it reduces the size of the black and informal markets where criminals and terrorists hide their illicit financing operations.

This argument makes the attainment of financial inclusion beneficial for combating financial crime (FATF, 2025). Consequently, FATF’s updated guidance expects countries and the private sector to adopt and implement risk-based AML/CFT/CPF measures that simultaneously combat illicit financing while ensuring sustained provision of appropriate financial services to those that pose low ML/FT risks and applying enhanced measures for higher risk clients (FATF, 2025). This risk-based approach will compel financial institutions to consider the risks of financial exclusion and the benefits of bringing people into the regulated financial system while implementing AML/CFT measures.

Use Regulation or Legislation to Ensure That the Right to Own a Fully Operational Bank Account Supersedes the Right of a Bank to Restrict or Close a Bank Account

Regulation may guarantee the right to a basic bank account, as emphasised in De Koker et al. (2017). However, such regulation may not be effective if it does not simultaneously guarantee that the right to own a fully operational bank account supersedes the right of a bank to restrict or close the bank account. Therefore, in the interest of financial inclusion, there is a need for regulation or legislation that will ensure that the right to own a fully operational bank account supersedes the right of a bank to restrict or close the bank account.

When such regulation or legislation is in place, even if a bank has identified a client’s transactions to pose high-risk to the bank, the regulation or legislation would motivate the bank to find other innovative ways to mitigate the financial crime risk posed by the high-risk client, without completely cutting off the provision of financial services to the high-risk client, to prevent financial exclusion of the high-risk client. Such regulation or legislation will bring an end to outright de-banking of bank clients without notice.

Some innovative ways to deal with high-risk clients under the proposed legal or regulatory framework include the following. For example, the financial authority or the central bank of a country can work with retail banks to offer Limited Purpose Banking Accounts to individuals with higher ML/TF risks (e.g. ex-offenders in serious financial crimes), as was the case in Singapore. The Monetary Authority of Singapore encouraged banks to adopt this approach.

Another implementation approach would be to demand that high-risk clients provide substantial additional information about the source, purpose and recipient of their initiated transactions before the transaction is processed. This approach will ensure the financial inclusion of high-risk clients while collecting useful information that would be used to take enforcement action against the high-risk client and the recipient of the transaction if evidence of illicit financing is established.

Conclusion

This opinion piece explored the implications of de-risking and de-banking for financial inclusion. It argued that recent acts of de-risking and de-banking can be traced to financial impropriety in the banking sector, financial regulatory convenience, and the international powerplay by regional powers supported by intermediary banks and FATF. It argued that de-risking and de-banking affect developing countries and small developing states disproportionately by curtailing their access to international financial markets, constraining economic participation, and impeding growth and development. It also identified the benefits of de-risking and de-banking to banks which includes enhanced reputation, better risk management, decrease in regulatory compliance costs and avoidance of regulatory penalties.

It also identified the consequences of de-risking and de-banking to affected individuals which include inconvenience, frustration, reputational damage, loss of business relationship and loss of livelihood. It further argued that de-banking affects financial inclusion through its effect on vulnerable people, people living in marginalized communities, and it leads to expansion of the informal financial sector, which is a setback for financial inclusion. The recommended remedies to combat de-risking and de-banking include limiting banks’ discretion to de-risk and de-bank people, urging banks to implement FATF’s 2025 guidance on financial inclusion and anti-money laundering and terrorist financing measures, and using regulation or legislation to ensure that the right to own a fully operational bank account supersedes the right of a bank to restrict or close a bank account.

The practical implication of de-risking and de-banking is that the banking sector will be able to mitigate client-specific risk, but banks may not escape legal and social consequences of de-risking and de-banking customers, such as lawsuits, attacks on bank staff and damage to bank properties by aggrieved customers whose accounts have been restricted or closed without notice. To avoid this, banks should make it a duty to pre-inform affected individuals about the risk they pose to the bank and give them a right to appeal an impending de-risking and de-banking decision if their formal accounts have been flagged for restriction or closure.

The policy implication is that while de-risking and de-banking may occur for good reasons, it can have a devastating effect on people. When these effects begin to materialise, further policy/regulatory intervention will be needed to mitigate the adverse effects. Therefore, it is recommended that policymakers should collaborate with banks to find alternative ways to address client-specific account risks without resorting to an out-right de-risking and de-banking of customer’s account in the first instance. To achieve this, a regulatory approach that enhances transparency of the de-risking and de-banking process, clarifies acceptable grounds for de-risking and de-banking and provides channels for appeal is needed. When such regulation is in place, it will ensure that the financial system is safe and that client-specific risks are managed effectively while protecting banked adults, their right to financial inclusion and their right to maintain a banking relationship.

The implication for research is that more knowledge and evidence is needed to investigate the internal and external determinants of de-risking and de-banking as well as its effect on financial inclusion and economic wellbeing. The collection of better data and data sharing can provide useful insights to improve understanding of the determinants and effects of de-risking and de-banking. Such data can also provide insights into the implication of de-risking and de-banking for social inclusion and economic inclusion.

Several avenues for future research can be explored. For example, I argued that banks have discretion over de-risking and de-banking decisions, but such de-risking and de-banking decisions do not occur in a vacuum and there is almost certainly a lot more going on than banking research or financial inclusion research has established to date. For example, what internal pressures causes banks to abruptly de-risk and de-bank a customer without prior notice when they could have easily informed the customer about an impending account restriction or closure. Isolating the underlying sources of internal pressure to de-risk and de-bank clients from ‘regulatory convenience’ is an important avenue for future research. Another interesting area for future research is to obtain real-world de-banking data and financial inclusion data to empirically determine whether a negative relationship exist between the two. Such analyses should be conducted for developing countries and developed countries, to determine whether the level of development influences the relationship between de-banking and financial inclusion.

Footnotes

ORCID iD

Peterson K. Ozili

Funding

The author received no financial support for the research, authorship, and/or publication of this article.

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

AI Statement

“No AI tools were used in the preparation and/or write-up of this manuscript”.

Notes

References

Ahmad

M. M.

(1976). The developing countries and access to capital markets. Finance and Development, 13(4), 26.

Anthony

(2025). Debanking and the Need for Transparency. Cato Institute, Testimony. https://www.cato.org/testimony/debanking-need-transparency

Bester

Chamberlain

de Koker

Hougaard

Short

Smith

Walker

(2008). Implementing FATF standards in developing countries and financial inclusion: Findings and guidelines. A Genesis FIRST Initiative Report. https://www.findevgateway.org/sites/default/files/publications/files/mfg-en-paper-implementing-fatf-standards-in-developing-countries-and-financial-inclusion-findings-and-guidelines-feb-2008.pdf

Cama

F. R.

Emara

Trabelsi

(2024). Financial inclusion and the informal sector. Research in International Business and Finance, 70(Part B), 102379. https://doi.org/10.1016/j.ribaf.2024.102379

Charles

D. A.

(2022). De-risking and the loss of correspondent banking in the Caribbean: Causes, impact, and response. In Tavidze, A. (ed.). Progress in economics research, Vol. 4. Nova Publishers.

Collin

De Koker

Juden

Myers

Ramachandran

Sharma

Tata

(2015). Unintended consequences of anti–money laundering policies for poor countries. A centre for global development working group report. https://www.cgdev.org/sites/default/files/CGD-WG-Report-Unintended-Consequences-AML-Policies-2015.pdf

Dahdal

(2024). Immigrants and innovators: Financial inclusion and the ‘de-banking’ of the digital asset industry. Law, Innovation and Technology, 16(2), 599–630. https://doi.org/10.1080/17579961.2024.2392939

De Koker

Casanovas

(2024). De-risking’, de-banking and denials of bank services: An over-compliance dilemma? In Financial crime, law and governance: Navigating challenges in different contexts (pp. 45–70): Springer Nature Switzerland.

De Koker

Goldbarsht

(2024). FATF’s risk-based approach: Has the pendulum swung too far? In Financial crime and the law: Identifying and mitigating risks (pp. 247–262): Springer Nature Switzerland.

10.

De Koker

Singh

Capal

(2017). Closure of bank accounts of remittance service providers: Global challenges and community perspectives in Australia. University of Queensland Law Journal, 36(1), 119. https://doi.org/10.3316/informit.255897985295581

11.

D’Hulster

Morris

Jaffer

de Koker

(2023). The decline of correspondent banking in Pacific Island countries. A Pacific Islands forum report. https://forumsec.org/sites/default/files/2024-05/CBR_Report_FINAL.pdf

12.

Drezner

D. W.

(2015). Targeted sanctions in a world of global finance. International Interactions, 41(4), 755–764. https://doi.org/10.1080/03050629.2015.1041297

13.

Durner

Shetret

(2015). Understanding bank de-risking and its effects on financial inclusion: An exploratory study. OXFAM Publication. Global Center on Cooperative Security.

14.

Emile Van Der Does De Willebois . (2017). De-risking impedes access to finance for non-profit organizations. World Bank Blog. https://blogs.worldbank.org/en/psd/de-risking-impedes-access-finance-non-profit-organizations

15.

FATF . (2011). Financial action task force annual report 2011 to 2012. https://www.fatf-gafi.org/content/dam/fatf-gafi/annual-reports/FATF_annual_report_2011_2012_website.pdf.coredownload.pdf

16.

FATF . (2021). High-level synopsis of the stocktake of the unintended consequences of the FATF standards. https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Unintended-Consequences.pdf

17.

FATF . (2025). FATF guidance on financial inclusion and anti-money laundering and terrorist financing measures. https://www.fatf-gafi.org/en/publications/Financialinclusionandnpoissues/guidance-financial-inclusion-aml-tf-measures.html

18.

Fugazza

Nicita

(2013). The direct and relative effects of preferential market access. Journal of International Economics, 89(2), 357–368. https://doi.org/10.1016/j.jinteco.2012.09.001

19.

Gabor

(2023). The (European) derisking state. Stato e Mercato, 43(1), 53–84.

20.

Grima

Baldacchino

P. J.

Abela

J. M.

Spiteri

J. V.

(2020). The implications of derisking: The case of Malta, a small EU state. Journal of Risk and Financial Management, 13(9), 216. https://doi.org/10.3390/jrfm13090216

21.

L. T.

Thang

D. N.

(2023). Economic sanctions and global banking flows: The moderating roles of financial market properties and institutional quality. The Journal of International Trade & Economic Development, 32(3), 365–390. https://doi.org/10.1080/09638199.2022.2119486

22.

Hill

J. A.

(2026). Governmental debanking. Texas A&M Law Review, 13(4), 1227–1286. https://doi.org/10.37419/lr.v13.i4.2

23.

Jelisejevs

(2023). De-banking v good faith: Doctrinal assessment of bank’s interests when terminating payment account without customer’s consent in the view of EU and Latvian law. Liverpool Law Review, 44(1), 183–204. https://doi.org/10.1007/s10991-023-09324-y

24.

Mirkina

(2021). FDI and sanctions. In Research handbook on economic sanctions (pp. 369–387). Edward Elgar Publishing.

25.

Moore

Scott-Joseph

(2025). De-risking. In The new palgrave dictionary of economics (pp. 1–4): Palgrave Macmillan.

26.

Nguyen

(2025). Blanket De-banking: Unintended consequence of the anti-money laundering and counter-terrorism financing legislation in Australia (Masters degree dissertation), Macquarie University. A thesis submitted to Macquarie University for the Degree of Master of Research.

27.

Nguyen

L. Q. T.

Ahmed

(2023). The impact of economic sanctions on foreign direct investment: Empirical evidence from global data. Journal of Economics and Development, 25(1), 79–99. https://doi.org/10.1108/jed-10-2022-0206

28.

Nocco

B. W.

Stulz

R. M.

(2006). Enterprise risk management: Theory and practice. Journal of applied corporate finance, 18(4), 8–20.

29.

Otudor

L. E.

Bagheri

(2024). Legitimacy of power exercised by FATF under international law. Journal of Financial Crime, 31(6), 1289–1301. https://doi.org/10.1108/jfc-09-2023-0239

30.

Ozili

P. K.

(2018). Impact of digital finance on financial inclusion and stability. Borsa istanbul review, 18(4), 329–340. https://doi.org/10.1016/j.bir.2017.12.003

31.

Ozili

P. K.

(2020). Theories of financial inclusion. Uncertainty and challenges in contemporary economic behaviour (pp. 89–115). Emerald Publishing Limited.

32.

Ozili

P. K.

(2021). Financial inclusion research around the world: A review. Forum for Social Economics, 50(4), 457–479. https://doi.org/10.1080/07360932.2020.1715238

33.

Perry

Peksen

(2024). Economic sanctions and labour rights abuses in target countries. European Journal of Political Research, 63(1), 5–25. https://doi.org/10.1111/1475-6765.12581

34.

Pyle

D. H.

(1999). Bank risk management: Theory. In Risk management and regulation in banking: Proceedings of the international conference on risk management and regulation in banking, Boston, MA, 1999 (pp. 7–14). Springer US.

35.

Ramachandran

Collin

Juden

(2018). De-risking: An unintended negative consequence of AML/CFT regulation. In The palgrave handbook of criminal and terrorism financing law (pp. 237–272). Springer International Publishing.

36.

Stevenson

(2023). Operation choke point: Myths and reality. Administrative Law Review, 75(2), 317–361.

37.

Styles

(2026). De-banking ‘risky’ customers: Contractual exclusion of customers by financial institutions and AML/CTF ramifications. In Combating financial crime: Intended and unintended consequences (pp. 271–294). Springer Nature Switzerland.

38.

Turegano

D. M.

Herrero

A. G.

(2018). Financial inclusion, rather than size, is the key to tackling income inequality. The Singapore Economic Review, 63(01), 167–184. https://doi.org/10.1142/s0217590818410047

39.

Zywicki

T. J.

(2025). Political debanking. George Mason Law & Economics Research Paper , 25–04. https://doi.org/10.2139/ssrn.5173173