NCB closing most cambio accounts

National Commercial Bank Jamaica will be locking down most accounts held by cambios in three months' time.

In a release last Friday, NCB said that having concluded an internal assessment, it made the decision to exit most relationships with persons holding licences to operate cambios "in order to ensure that we employ a solid governance structure and operate within a robust compliance framework".

"We will therefore terminate most relationships in the next three months, and have ceased opening new accounts for such entities," the release said.

The bank began putting distance between itself and its cambio clientele earlier this year when it curtailed certain foreign-exchange transactions. The current decision further severs those ties.

The release last Friday said the decision was taken in light of "globally recognised exposure to money laundering and terrorist-financing risks associated with these businesses and the extensive effort required to continue managing those risks while providing the services required going forward".

The release did not qualify which cambios would survive the cut.

In January, the members of the Cambio Association of Jamaica sought the intervention of the minister of finance and the Bank of Jamaica in a bid to have NCB reverse course on its policy.

The BOJ indicated at the time it was unlikely to have much impact on what it said was essentially a commercial decision.

After NCB's policy shift became public, the bank qualified that it was not closing accounts; rather, it would no longer accommodate wire transfers and other foreign- currency transactions.

A similar decision was taken by RBC Royal Bank back in 2011.

OVERSEAS DIRECTIVES

Both banks said they were acting in accordance with the wishes of their overseas correspondent banks.

"NCB's continued provision of banking services to cambio businesses has been challenged as some of our correspondent bankers overseas, on whom we rely to facilitate international and foreign-currency transactions for our customers, asked that we not transact businesses through them for these businesses," NCB reiterated last Friday.

"Although cambios are regulated in Jamaica, regulation does not remove the risk, and our correspondent bankers' postures have been driven by their desire to effectively manage the risks they face by the sector," it said.

NCB points out that this approach is not unique to Jamaica.

There has been an international movement among banks to distance themselves from money-management companies, including cambios and money-transfer operators.

The issue has caught the attention of the World Bank, which warned that the trend is potentially harmful to remittance-dependent economies. The World Bank has floated the idea that national banks could explore ways of helping the money companies in their jurisdictions.

NCB's current release did not reference accounts held by remittance companies.

The bank said its own business could be disrupted were it to maintain certain accounts.

"Our correspondent banking relationships are very important and directly impact the extent of the bank's reach in the international financial market and ability to facilitate our customers doing transactions overseas and in foreign currencies," said the NCB release.

marcella.scarlett@gleanerjm.com