John A Rolle: Industry solutions to the withdrawal of correspondent
banking relationships
Opening remarks by Mr John A Rolle, Governor of the Central Bank of The Bahamas, at the Third
Caribbean Roundtable on Industry Solutions to the Withdrawal of Correspondent Banking
Relationships, Nassau, 29 October 2018.
* * *
Good morning all, and welcome to the Caribbean Roundtable on Industry Solutions to the
Withdrawal of Correspondent Banking Relationships (CBRs). I would like to extend a special
thanks to the International Monetary Fund (IMF) for convening these sessions. Events such as
these provide valuable opportunities for stakeholders to engage, share ideas and plan decisive,
actionable steps.
The February and November 2017 Roundtables in Barbados and Jamaica brought together
global correspondent and respondent banks, and other stakeholders to discuss regional
solutions to CBR withdrawal.
The discussions identified the need to strengthen respondent banks' risk management capacity,
and considered whether there was merit in consolidation of transactional traffic and
reconsideration of some high-risk business lines. Increasingly Fintech is seen as providing some
outlet for relief, including through substitution for traditional intermediation channels. At the
regional level, consolidation of AML/CFT supervision and implementation of standardized
AML/CFT regulations were considered as well.
The CARICOM Central Bank Governors have continued to explore their own Action Plan
developed in late 2016, which acknowledges the worth of some ideas that emerged in the
Roundtable discussions, including effective communications strategies, ongoing data collection
to inform policies and outreach, and broad domestic education to strengthen the culture of
AML/CFT compliance.
Here in The Bahamas, we have taken a series of steps to lower the risk (both real and perceived)
of banking. We have revised a suite of legislation, including the Proceeds of Crime Act,
AntiTerrorism Act, and the Financial Transactions Reporting Act and associated Regulations. In
tandem with our fourth Mutual Evaluation Report, on AML/CFT effectiveness we revised our
AML/CFT guidelines, and issued new guidance on proliferation financing; we have developed
guidance on financial crime risk management, and revised our customer due diligence
requirements for on-boarding of business. Working together, the Bahamian financial sector
regulators held our first national conference on AML/CFT risks management in September 2018,
to build general stakeholder awareness.
As technical improvements to AML/CFT regimes continue, the impression is that perceptions are
not reforming fast enough. We need to understand why this is the case.
I should point out too that there are new strains around access to foreign currency cash
services, which are being withdrawn from the limited channels that exists, in the Caribbean,
underscoring the often qualified, restrictive nature of correspondent relationships that have
survived.
The Financial Stability Board has observed that the corridors for correspondent banking services
are still decreasing on a global basis, with fewer institutions providing the services. The volume
of transactions though, has not declined, pointing to the rising concentration risks posed to
jurisdictions, such as those in the Caribbean.
While we are encouraged by the promises that Fintech based solutions provide, especially for
AML/CFT systems and possibly some of the intermediation hurdles, there are important caveats
such as these two:
First, the promised solutions further underline the importance of making medium-term
progress on cost effective harmonization, both in legal frameworks and in the practices of
and standards that apply to the information content on the actors; and the transparent
commercial context to financial flows.
Second, nothing in the Fintech space points to outright elimination of the need for
correspondent banks. Solutions proffered in our region do not eliminate the need for net
international settlement in dominant currencies such as the US Dollar.
These two points should suffice in understanding the work that is still ahead of us, even though I
could say much more.
Our medium-term progress therefore must always return to how we preserve CBR access,
even if marginal substitutes are procured.
It is my hope that today's engagement will cement more progress in these areas, including more
precision on technical assistance to reduce both our perceived and actual risk profiles.
Again, my thanks to the IMF for continuing to facilitate dialogue among all stakeholders.
Welcome.