Apr 11, 2018

Where’s the White List?

Where’s the White List?

Investopedia defines blacklist as, “a list of persons, organizations or nations suspected or convicted of fraudulent, illegal or criminal activity, and therefore are excluded from a service or penalized in some other manner.” In short, when an entity fails to meet payments or poses a threat, their name enters a ‘blacklist’ which makes it difficult for them to apply for any type of financial service.

With terrorism, money laundering and financial crisis, the blacklist does a great job at constantly updating and gathering threats. This service has helped to protect banks from shady clients and the risks they could pose to the economy or to the banks themselves. Each merchant or individual trying to open a bank account is subjected to a specific process to guarantee the legitimacy of their identity and reputation. Banks oftentimes rely on third-party resources to provide credit scores or individual reports in order to determine if they are a safe customer. If they have been flagged as threatening, typically it will be difficult for them to open a bank account anywhere. There are also measures that these individuals can take to remove themselves from the blacklist, but it isn’t a simple process, and usually comes with multiple disadvantages.

Blacklisting has its benefits, and while the world has its handful of dishonesty, it also has its upstanding citizens. Just as banks have databases of blacklists, they should consider issuing a whitelist. For instance, if an individual has a clean history of abiding by financial regulations and making payments on time, they should be placed on the whitelist. That way, they don’t have to deal with the time-consuming process of attempting to open a bank account. When a client or merchant has proven to be legitimate, they shouldn’t have to repeat the same security measures each time they need to utilize financial services.

With just one perspective, individuals and merchants are at an unfair disadvantage when applying for bank accounts. Without a continuum of financial client ‘types’, it is easy for banks to label merchants as bad or dangerous to work with. Unfortunately, this takes a toll on a lot of businesses and individuals. Legitimate merchants are forced to look for alternative banking solutions, which oftentimes is more expensive for them. Ironically, it is the new businesses that cannot afford the expensive option. Also, a merchant that is unable to associate themselves with a respected bank will put a bad light onto their business. Potential customers may not trust the company because they have no perceived value behind them. If a bank can’t trust them, who can?

A whitelist can even the score. Banks will benefit because they will have something to compare blacklisted clients to. They will not be so quick to assume what a risky merchant or individual is. It is estimated that banks spend $100 billion per year on compliance costs. With a whitelist, banks will not have to spend as much time, finances and resources on compliance duties. Instead, if someone appears on the whitelist, they will not need additional screening. This is also beneficial to loyal and honest merchants. The deducted time applying for bank accounts will allow them to move forward on the projects and goals.

Safety is one of the most important aspects of any business. It is important for any respected institution to guarantee the security of their clients, but also guarantee security to their business as well. Blacklists do a great job at ensuring that banks they are contracting with upstanding individuals or institutions, but this comes at such a large cost to the banks those attempting to open a bank account. Unfortunately, so much of the ability to thrive in the business world today lies on the ability to open a bank account. Individuals and merchants are punished every day because of rigid guidelines in regards to who poses a threat. Whitelists will give honest merchants the earned advantage of financial services without the security scrutiny. In return, banks will save great deals of time and money, and can invest their resources in other ways of expanding or modernizing finance.

More Stories


Digitizing the Transportation Industry

February 6, 2018

“The relationship between the tech and auto industries has only strengthened in recent years due to talk of..

Lean More


Where’s the White List?

April 11, 2018

Investopedia defines blacklist as, “a list of persons, organizations or nations suspected or convicted of fraudulent, illegal or..

Lean More


EU Regulations and Attitude Adjustments

October 24, 2018

One of the most difficult challenges of the financial technology sector is the lack of consistency with regulations...

Lean More