CDB funds project to prevent loss of correspondent banking relationships
The Caribbean Development Bank (CDB) has approved funding of US$250,000 to strengthen financial transparency and assist in preventing the loss of correspondent banking relationships (CBRs) in the region.
The project will be implemented over three years in partnership with the Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank Group. MIF will also manage the project, the CDB said in a release.
In the Caribbean, correspondent banking relationships facilitate a number of payment systems, including international trade, cross-border payments and receipt of remittances.
Recently, the CDB said, some large international banks have started terminating or severely limiting those relationships with smaller local and regional banks in an effort to reduce exposure to risks associated with money-laundering and financing of terrorism.
This process, known as de-risking, has negative implications for the Caribbean, potentially resulting in the loss of trade relationships and negative economic impacts, the CDB said.
“CBRs are fundamental to the efficient operation and resilience of the global financial system. This project will contribute to a more stable financial system in the Caribbean, which will in turn allow more banks to access CBRs, so that they can continue to carry out international transactions. This is critical if the Caribbean is to reduce poverty and spur economic development,” said Daniel Best, Director of Projects at the CDB.
The project will be a pilot initiative and will include The Bahamas, Barbados, Belize, Jamaica and members of the Organisation of Eastern Caribbean States.
It has three components:
1. Strengthening the implementation of, and compliance with, international financial integrity standards by governments in the region, including updating laws and regulations as required.
2. Increasing the technical capacity of banks and credit unions in the Caribbean to conduct customer due diligence, and adopt anti-money laundering best practices. This will include training for staff at financial institutions.
3. Improving public-private sector coordination with regulators to more effectively address de-risking and develop a mechanism for ongoing dialogue between this group and external regulators and foreign banks.
Components two and three will be executed by the Office of the Secretary of the Association of Supervisors of Banks of the Americas.