ABA Banking Journal
The Basel, Switzerland-based Financial Stability Board published a report today on the decline in international correspondent banking activity and actions international bodies are taking to stem it. Summarizing forthcoming survey research from the World Bank, the FSB said that correspondent banking services have been reduced in about half of the emerging-market jurisdictions surveyed, while three-quarters of large banks have reported reducing their correspondent banking customer accounts over the past three years.
Reasons for this decline include changing risk appetites on the part of correspondent banks, “de-risking” in response to regulatory uncertainty, the expense of due diligence and legal risks of providing services in jurisdictions with anti-money laundering deficiencies or sanctions, the FSB found.
The report summarized action being taken by international bodies to address the issue. The World Bank will soon release results of its survey. The Financial Action Task Force is working to clarify regulatory expectations, while FATF and the FSB are working to find ways to improve AML compliance in deficient jurisdictions. The FSB also said it will promote the use of legal entity identifiers to help correspondent banks better meet their know-your-customer obligations.