AML and KYC requirements remain top barriers to expanding trade finance operations

Requirements for anti-money laundering (AML) and know your customer (KYC) compliance remain the top barriers to expanding trade finance operations according to 72 per cent of banks canvassed in the latest Trade Finance Gaps, Growth and Jobs Survey released by the Asian Development Bank (ADB).

The survey found that the global trade finance gap grew to an all-time high of US$1.7 trillion in 2020, a 15 per cent increase from two years earlier, as the pandemic heightened economic and financial uncertainties and devastated global trade.

Overriding correspondent relationships

The complexity and costs involved in the conduct of AML/KYC due diligence alongside measures to combat the financing of terrorism often override correspondent relationships that are essential for small- and medium-sized enterprises and clients in developing economies to continue to access finance to support their trade transactions according to the survey.

As well as AML and KYC requirements, other barriers to trade finance operations included heightened economic uncertainties due to the pandemic according to 61 of responding banks while 31 per cent of respondents said the pandemic raised risks faced by banks.

Persistent barriers

Other major barriers are quite persistent. Of the top five factors identified in the current survey, four were included in the 2019 survey.

These included AML and KYC requirements alongside Basel capital regulatory requirements (62 per cent); low credit ratings of applying firms (62 per cent) and banks’ low credit ratings (59 per cent).

The ADB’s Trade Finance Gaps, Growth and Jobs Survey can be downloaded from here.

Categories: Trade Based Financial crimes News

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