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Bank De-Risking Highlighted At Commonwealth Meeting

by Jason Gorringe, Lowtax.net, London
18 August, 2016

The Commonwealth Secretariat recently hosted a public meeting to discuss the findings of a survey into the challenges faced by its members with respect to the drop in correspondent banking relationships, or bank "de-risking."

The Commonwealth Secretariat has 53 members but its Caribbean members, many of which are low-tax financial centers, are among the worst hit by bank de-risking.

Commonwealth Economic Policy expert Samantha Attridge, Head of Finance and Development Policy at the Secretariat, said: "De-risking is curtailing countries' access to essential cross-border financial services such as trade finance and international money transfers, which are essential to many economies. The issue is particularly detrimental to vulnerable economies and small states in the Commonwealth."

Attridge said the Secretariat's report "shows a worrying rise in correspondent banking relationship closures, doubling year-on-year since 2013. The issue is particularly affecting regions such as the Caribbean, where for example in Belize seven of Belize's nine banks lost their correspondent banking relationships, as well as the Central Bank losing one of its correspondent banking relationships."

"Major banks are now avoiding banking customers, or categories of customers, they deem low profit or high risk. The drivers are complex and varied but global regulations that are designed to stop money laundering and the financing of terrorism have contributed to this worrying phenomenon."

Participants at the public meeting included the Executive Secretary of the Financial Action Task Force (FATF), the international anti-money laundering and countering the financing of terrorism standard setter, as well as senior representatives from the British Bankers' Association, HSBC Holdings, Santander, and the Wolfsberg Group.

Delegates applauded the Commonwealth Secretariat for proposing measures that balance the need to prevent illegal activity while ensuring smaller institutions in developing countries are not excluded from the global financial system. The measures include setting best practice standards for money service businesses to boost their legitimacy and reputation, and improving guidance and risk-tolerance standards for banks.

Commonwealth Deputy Secretary-General Deodat Maharaj, who chaired the public meeting, stressed the importance of protecting countries and communities from corruption and terrorism, but warned that "a one-size-fits-all" approach to regulation does not serve the needs and reality faced by Commonwealth developing countries.


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