“A recent World Bank survey and study revealed that the Caribbean appeared to be the region most severely affected by the de-risking strategy,” the Minister of Finance and the Public Service, the Hon. Audley Shaw said during his address at the IMF/World Bank Annual meeting held in Washington this week.
Correspondent banking relationships (CBRs) are critical for enabling key economic and financial transactions such as remittances, foreign direct investments and international trade in goods and services, which constitute some of the key drivers for sustaining the Caribbean’s growth and development
The Finance Minister in his impassioned address stated that, it was a worrying threat to sustainable growth and development of the Caribbean region and as a result of this de-risking strategy practiced by some correspondent banks; several Caribbean Banks have been adversely impacted.
Many money service businesses, including a number of cambios (money exchanges) have been excluded from accessing the services of global correspondent banks. These developments threaten to stifle Jamaica’s objectives of financial inclusion, poverty reduction and sustained growth, which are important tenets of the economic programme which undergird the National Growth Agenda.
In this context, correspondent banks are apprehensive about doing business with money transfer operators and remittance companies. The reasons for the restriction or termination of correspondent banking relationships are mixed. The predominant one points to the high cost of compliance for global correspondent banks stemming from heightened anti-money laundering and counter financing of terrorism (AML/CFT) requirements. The correspondent banks say this cost of compliance dwarfs the business returns from smaller territories, particularly if they are classified as high risk clients and products.
Minister Shaw stressed that de-risking not only constrains growth and development, it also undermines financial inclusion. “Ironically, without the clear and transparent conduits provided by correspondent banking relationships, money could move through the murky shadows of the underground economy which will make it even more vulnerable to loss and capture by illicit and illegal activities,” Minister Shaw said as he addressed the Annual IMF/World Bank meeting.
Jamaica, like many of its Caribbean neighbours is facing the challenge of de-risking. Over the past five years, international correspondent banks have restricted or terminated their relationships with a number of deposit-taking institutions operating in Jamaica even as new relationships have been established.
The Caribbean has been addressing the problem of de-risking by proactively reassuring our international partners that our AML/CFT regulatory framework is robust. It was only in June of this year, that Jamaica signalled its continued commitment to ridding the country of the scourge of money laundering and cyber crimes. “Our message has been that the Jamaica is a place for correspondent banks to do business,” Minister Shaw said.
“Caribbean jurisdictions have worked together to establish the regulatory framework to efficiently supervise banking and money services business and to effectively identify and manage the money laundering and terrorism financing risks in the financial sector,” Minister elaborated.
Regional policy harmonisation is already being coordinated by the Committee of Caribbean Central Bank Governors, the Caribbean Group of Bank Supervisors, the Caribbean Financial Action Task Force, the Caribbean Association of Insurance Regulators and Caribbean membership of the Global Forum on the Exchange of Tax Information.
The IMF and World Bank meet each autumn in what is officially known as the Annual Meetings of the International Monetary Fund and the World Bank Group and is attended by finance ministers and their technical team from across the globe.
The three day IMF/WB Annual Meetings runs from Thursday October 6 through to Sunday October 9, 2016 and will include seminars, regional briefings, press conferences, and other events focused on the global economy, international development, and the world's financial markets.
October 10, 2016
For further information contact:
Communication & Public Relations Branch
Ministry of Finance and the Public Service
30 National Heroes Circle
Tel: (876) 932-4656/4660/4655
Contact: Elaine Oxamendi Vicet/Kadisha Sharp @MOFPJA https://www.facebook.com/mofp.gov.jm