Commonwealth addresses de-risking problem

The Commonwealth has convened a meeting to focus on the problem of “de-risking” – the growing trend for international banks to curtail relationships with banks in vulnerable economies to lessen the risks involved in applying anti-money laundering and countering financing of terrorism (AML/CFT) regulations.

Participants, who included bankers, financial experts and global regulators, discussed the Commonwealth’s recent Disconnecting from Global Finance Report.

Deteriorating relations

The report highlights the deteriorating number of correspondent banking relationships (CBRs) between small local banks and major international banks.

According to Commonwealth expert, Sam Attridge, the report “shows a really worrying rise in CBR closures, doubling year-on-year since 2013.”

“This is particularly detrimental to the vulnerable economies and small states of the Commonwealth, who risk becoming marginalised from the global finance system, curtailing their access to essential cross-border financial services such as trade finance and remittances,” she added.

Development threat

According to Attridge, this poses not only a risk that financial stability is undermined but also hampers the ability of many of the world’s most marginalised countries to achieve their sustainable development goals.

The report proposes measures for improving guidance and risk-tolerance standards for banks and balancing the need to prevent illegal AML/CFT activity with ensuring smaller institutions in developing countries are not excluded from the global financial system.

Categories: Trade Based Financial crimes News

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