FSB publishes report on action plan to address decline in correspondent banking

By way of update to the G20 leaders, the FSB published a report on its action plan to assess and address the decline in correspondent banking (CB).

In November 2015, the FSB published a four point action plan to assess and address the decline in CB.  The four areas of focus were to:

  • examine the dimensions and implication of the issue;
  • clarify regulatory expectations (as a matter of priority) including guidance by FATF and BCBS;
  • examine domestic capacity – building in jurisdictions that are home to affected respondent banks; and
  • work by the CPMI to strengthen tools that may contribute to reducing due diligence costs for CB relationships.

Alongside the progress report, the FSB also published a Correspondent Banking Data Report  that contained data collected from a FSB survey of over 300 banks  in 50 jurisdictions combined with data provided by SWIFT.

The decline in CB presents a concern as it may affect respondent banks ability to send and receive international payments or result in underground payment flows, which could have adverse consequences on international trade and the overall stability and integrity of the financial system.

The report states that there are a number of reasons for the decline in CB relationships, such as lack of profitability and sanctions / AML/ CTF regimes but the countries most affected by the decline tend to be those who do not have sufficient or known compliance with AML /CFT standards.

The areas where work needs to be continued are:

  • monitoring of trends at the global level and of the impact on jurisdictions;
  • monitoring of the FATF and revised BCBS guidance by way of follow up statements at national level by national regulators to clarify expectations at a national level.  FATF and BCBS will be expected to monitor this;
  • technical assistance to jurisdictions where AML/CTF frameworks are inadequate; and
  •   addressing the challenge that remittance providers face in accessing banking services.

The FSB’s next progress report will be published in December 2017.