JPMorgan Chase & Co. (JPM) dropped Al-Rajhi Bank, the world’s largest Shariah-compliant lender, as a correspondent banking client amid a push to improve risk controls, said two people with direct knowledge of the move.
The relationship with Saudi Arabia’s biggest publicly traded bank ended Dec. 31 because JPMorgan couldn’t get enough information on where payments in dollar-clearing services for Al-Rajhi had originated, said one of the people, who requested anonymity because the decision wasn’t public.
JPMorgan said it cut off the service to about 500 foreign lenders last year as regulators press the world’s biggest banks to verify that transactions are used for legitimate business. The crackdown seeks to halt funds tied to money laundering, terrorism and countries covered by economic sanctions. Correspondent accounts allow lenders to take deposits or make payments on behalf of foreign institutions.
“JPMorgan has to be extra careful to make sure they’re adhering to standards and not even approaching anything questionable,” said David Kass, a professor at the University of Maryland’s Robert H. Smith School of Business.
The two banks haven’t been cited by U.S. regulators for involvement in illegal money transfers. Tasha Pelio, a JPMorgan spokeswoman, declined to comment on clients of the company, which is based in New York and ranks as the nation’s largest lender by assets. A spokesman for Al-Rajhi (RJHI) didn’t respond to inquiries, and there was no response to messages sent to the firm’s Riyadh headquarters.
Last week, a North Dakota bank dropped Islamic hawala services.
And a few months ago it was reported that JP Morgan Chase has been closing Arab and Muslim bank accounts in Michigan. Ohio banks followed suit. Supporters of sharia and jihad are up in arms.
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