Banks, including HSBC and Standard Chartered, have been fined hundreds of millions of dollars by U.S. regulators in recent years, and banks fear they could be held liable even if they are only indirectly connected to someone involved in money laundering.
In response, many banks have shut down accounts for clients they view as risky, such as money service businesses that transfer billions of dollars in remittances to economies, from Somalia to South America, for fear the cash-dealing firms could be exploited by money launderers.
Cohen urged financial institutions to continue dealing with risky clients, despite the recent large fines against banks.
"These enforcement actions were not taken because of minor mistakes," he said. "So even as we promote financial integrity through regulatory and enforcement actions, financial institutions need not 'de-risk' to protect themselves."
FinCEN is set to issue a statement later on Monday that should help the financial industry maintain accounts with money transfer businesses despite their risks, Cohen said. The Treasury also plans to hold a public forum in January to address compliance with regard to money service businesses.