Correspondent banking relationships (CBRs) remain under pressure in several emerging markets due to concerns amongst international banks about the risks and potential fines associated with failures to comply with anti-money laundering and counter financing of terrorism (AML/CFT) regulations.
Several institutions, including the International Monetary Fund (IMF) have said that CBRs are in steep decline in a limited number of countries and are helping find solutions, but the financial industry reckons better compliance in emerging markets is the only real solution.
The IMF, along with the Financial Stability Board, World Bank, G20, Financial Action Task Force, Arab Monetary Fund, Committee on Payments and Market Infrastructures and other stakeholders, are helping countries improve their monitoring of CBRs and strengthen their legal, regulatory and supervisory frameworks.
But according to industry sources, their task remains a difficult one as international banks endeavour to balance their obligations to prevent financial crime and comply with regulations with a desire to aid financial inclusion.
Standard Bank Group for example recently found that in Kenya, one European institution that exited the market was simply replaced by another institution.
But in Angola, the termination of a relationship led to the bank having to replace its US dollar clearing services with a bespoke solution that also mitigated some regulatory risks.
According to Standard Bank, most of its terminated CBRs have been replaced.
Areas of improvement suggested by industry sources include better communication between financial institutions and regulators to ensure a level playing field between international banks and emerging market banks.
Other sources suggest it is up to banks and regulators in emerging markets to raise standards of AML/CFT compliance.
Categories: Trade Based Financial crimes News