Over the last couple of years, there has been a trend towards limiting the correspondent banking relationship with the closing of the bank accounts of clients perceived as high risk, Account closure continue across the USA, the UK and Australia.
These closures have significant humanitarian, economic, political and security implications. Today the Caribbean is being impacted by this phenomenon. Students will be required to critically analyze and provide policy direction on how to address this issue is the Caribbean. As such students are expected to outline:
1. The reason why de-risking is taking place of and its impact on banking industry in the Caribbean (10 marks)
De-risking is taking place as global banks consider CBRs(Correspondent banking relationship) to be a low-margin but involving high-risk activity. Also, the increasing cost of KYC and anti-money laundering is leading global banks to exit CBRs. CBRs can be made be a more attractive business for global banks if their cost is lowered through fintech or other innovations, or the risk could be reduced through effective anti-money laundering (AML) regime.
Caribbean countries have been severely affected by the threat of de-risking with the situation even worse for jurisdictions with offshore financial centers and those perceived at greatest risk of non-compliance with anti-money laundering (AML). In the region, more than 60 percent of the local and region based banks have reported a moderate or significant decline in CBRs. As the correspondent banking services have historically been provided by a small fraction of U.S. banks. local Caribbean banks impacted have to struggle to obtain the relevant services from other banks and further, if a replacement relationship is somehow found, banks may still face some challenges. The costs involved in a new relationship may be significantly higher and considering the termination of correspondent banking relationships entails a 3 month notice period which is not sufficient for the local banks in Caribbean to set up a replacement.
Over the last couple of years, there has been a trend towards limiting the correspondent banking relationship with the c...
Over the last couple of years, there has been a trend towards limiting the correspondent banking relationship with the closing of the bank accounts of clients perceived as high risk, Account closure continue across the USA, the UK and Australia. These closures have significant humanitarian, economic, political and security implications. Today the Caribbean is being impacted by this phenomenon. Students will be required to critically analyze and provide policy direction on how to address this issue is the Caribbean. As...