Correspondent Banking De-Risking: Why Banks Are Cutting Relationships and What Businesses Can Do

De-risking — the practice by which major banks terminate or restrict correspondent relationships with clients or respondent banks deemed to present disproportionate compliance costs — has fundamentally reshaped access to banking for certain business categories. Since 2015, the number of active global correspondent banking relationships has declined by approximately 25% according to SWIFT data, with the sharpest declines concentrated in small island developing states, money service businesses, and fintech-adjacent sectors. Understanding why this happens — and what can be done about it — is essential for any business that has lost a banking relationship or fears losing one.

The Economics of De-Risking

To understand de-risking, you must first understand the compliance economics of a global bank. A Tier 1 correspondent bank providing USD clearing access to a respondent bank in, say, a Caribbean jurisdiction, generates perhaps $50,000-$150,000 in annual fee income from that relationship. The compliance cost of maintaining the relationship — KYC refresh on the respondent bank, transaction monitoring of flows through the nostro account, periodic due diligence reviews — might represent a similar figure in direct costs. But the tail risk calculation is where de-risking originates: if the correspondent bank is fined $100 million because its respondent facilitated sanctions evasion, the expected value of that tail risk dwarfs the fee income.

This is the core problem. De-risking is not irrational from the correspondent bank's perspective. It is a rational response to asymmetric enforcement risk, where the potential downside (massive fines, reputational damage, deferred prosecution agreements) is enormous relative to the revenue generated. The FATF and the Financial Stability Board (FSB) have both acknowledged this dynamic in their published analyses of correspondent banking decline.

Sectors Most Affected

De-risking has hit some sectors far harder than others. The most consistently affected categories are:

• Money Service Businesses (MSBs): Remittance companies, currency exchange businesses, and payment agents have been the most heavily de-banked category globally. In the UK, the FCA has documented the difficulties faced by smaller MSBs in maintaining banking relationships, which has concentrated the market among larger, better-capitalised firms.
• iGaming and online gambling: The combination of high transaction volumes, cross-border flows, and the historical association between gambling and money laundering makes iGaming operators a commonly de-risked category, particularly by UK high street banks.
• Crypto businesses: Crypto exchanges, custodians, and crypto-to-fiat conversion services face systemic de-risking from the major clearing banks. Even FCA-registered crypto asset firms find it extremely difficult to maintain banking relationships with Tier 1 institutions.
• Offshore-registered companies: Companies incorporated in BVI, Cayman, Seychelles, or other offshore jurisdictions face heightened scrutiny from UK and EU banks, regardless of the nature of the underlying business.

The Regulatory Response

Regulators have acknowledged that de-risking is itself a problem — not just for the businesses affected, but for financial inclusion and the integrity of the global financial system. When legitimate MSBs are de-banked, they do not stop operating; they shift to informal channels, reducing transparency and actually increasing financial crime risk.

The FATF's June 2021 guidance on correspondent banking and July 2023 guidance on de-risking explicitly states that blanket de-risking of entire sectors is not consistent with a risk-based approach to AML/CFT. Similarly, the FCA's guidance on the Payment Accounts Regulations 2015 (PARs) requires that refusals of basic payment accounts to lawfully operating businesses be based on individual risk assessment, not sector-wide policies. The Economic Crime and Corporate Transparency Act 2023 includes provisions intended to address de-banking, and the FCA has published further guidance requiring banks to give adequate notice and reasons when terminating accounts for existing customers.

What Businesses Can Do

Build a Compliance Narrative

The most effective counter to de-risking is a comprehensive, proactively maintained compliance documentation package. This means a current AML policy, evidence of MLRO oversight, transaction monitoring documentation, and a clear explanation of the business model. Banks that de-risk based on sector do so partly because they lack the information to make individual risk assessments. Removing that information gap shifts the conversation.

Diversify Across Providers

Reliance on a single banking relationship is the primary operational risk associated with de-risking. Businesses in high-risk categories should actively maintain multiple payment accounts across different institution types — EMIs, neobanks, specialist payment firms, and where possible at least one traditional bank. The failure of one relationship should never be a business-critical event.

Consider Specialist Providers

FCA-authorised specialist EMIs and payment firms that focus on high-risk sectors have different compliance economics from Tier 1 banks. They have invested in the KYC and monitoring infrastructure to serve these sectors profitably, and their risk appetite explicitly includes iGaming, crypto, and offshore structures. The trade-off is typically higher fees and more rigorous onboarding, but the relationship stability is considerably greater.

Engage Early with Relationship Managers

Where a banking relationship appears at risk — unusual information requests, service restrictions, delayed payments — early engagement with the bank's relationship manager is almost always more effective than waiting for a termination notice. Banks do not always want to terminate; they want the compliance risk managed. Demonstrating active engagement with that risk can preserve relationships that might otherwise be terminated.