Data sharing amongst banks and measures to stem de-banking are on the agenda at the World Economic Forum in Davos this week.
At a private meeting, senior commercial and central bankers urged regulators to relax privacy laws that restrict data sharing and to take measures to ensure that banks in riskier emerging markets are not barred from global correspondent banking networks.
The meeting, which included senior participants from some of the world’s largest banks, pressed regulators to contemplate legislation that would allow banks to share due diligence on companies and individuals.
They suggested the creation of a legislative framework to accommodate a global database so banks would share due diligence reports on companies and individuals.
Bankers argued that as well as reducing compliance costs, such a move would help enforcement agencies combat money laundering and terrorist financing.
One central banker meanwhile expressed concerns over the growing trend for international banks to end correspondent banking arrangements with banks in emerging markets.
Since several emerging markets rely on commodity sales on trade finance terms in US dollars, their economies are particularly vulnerable to constraints to international trade.
De-banking by major banks in these jurisdictions would bar them from capital markets worldwide.
In countries where all international banks exit a market, it would fall to the central bank in that country to clear US dollar transactions with the Federal Reserve on a direct basis.
Central banks are not as well equipped as international banks to undertake due diligence and implement the range of counter money laundering and terrorist financing checks now required in international trade.
Commercial and central bankers at the meeting agreed that the process of UK and US bankers reducing their correspondent banking networks looked set to continue.
But the meeting appeared to agree that if bankers and regulators worked closer together, this could help the enforcement of anti-money laundering and counter terrorist financing legislation.
Closer cooperation could also help create mechanisms to maintain correspondent banking networks in emerging markets.
Categories: Trade Based Financial crimes News