Governor Eugene Holiday (at podium) addressing attendees at the conference.
MAHO–From a public policy perspective, it is imperative that governments continue to take urgent measures to address real or perceived gaps regarding compliance with Financial Action Task Force (FATF) standards regarding money-laundering and financing of terrorism.
This was one of the messages Governor Eugene Holiday gave to the more than 200 persons attending the opening ceremony of the two-day Caribbean Association of Banks (CAB) 46th conference at Sonesta Maho Beach Resort and Casino on Wednesday. The event, which ends today, is themed “Shaping a New Era in Caribbean Banking”.
Holiday stressed that the public must, at the same time, be made aware of the implications of the de-risking challenge to increase awareness and responsiveness.
“This should be aimed at improving the quality of customer information files as part of the know-your-customer obligations of banks. Implementing a technology-based compliance reporting system as part of the online banking platforms of banks can come a long way in reducing compliance cost and therefore the cost to the customers and Caribbean economies,” he said.
He also said that “as we transition to greater financial technology-based services in the Caribbean as a result of the rise of [financial technology companies – Ed.] Fintechs, we must draw from the lessons of de-risking.
“Investing in robust and secure digital infrastructure ought to be a priority in the region. It is thus essential that we work with the international community to implement the required safeguards to secure the integrity of the system. The Caribbean Association of Banks’ work on issues impacting the financial services community can be instrumental in that regard.”
Holiday said the financial system is widely considered to be the heart in the functioning of any economy. “Most, if not all, of us depend on financial institutions for handling our savings, for making payments and for making investments. Our ability to do so is so common that we take the payment system operated by the banking sector for granted.”
Noteworthy in this regard are international payment services, such as credit card settlements, wire transfers and access to foreign exchange. Without these everyday bank services, it would be very cumbersome if not impossible for wholesalers to pay to import food or for tourists to pay at hotels or for the Caribbean Association of Banks to organise this conference.
A vital element in the provision of these services, he added, is the access of Caribbean banks to global correspondent banking relations. It is common knowledge, Holiday said, that in recent years there have been withdrawals of correspondent banking relationships from Caribbean banks as wells as global banks from the region, widely referred to as de-risking.
Banks pulling out of the region include the Bank of America, Scotiabank, Royal Bank of Canada and CIBC. Banks from the Netherlands, Germany and the United Kingdom also restricted their correspondent banking relations with Caribbean jurisdictions.
“The cause for de-risking from the perspective of correspondent banks and the regulators in their countries lies in their assessment of the Caribbean as high-risk. This assessment is related to their concerns regarding regulatory requirements for anti-money-laundering and combating the financing of terrorism, regarding know-your-customer policies and regarding compliance,” Holiday said.
Several regional leaders have warned about the devastating impact this development will have and is having on the region’s economies if not addressed. The decisions of global correspondent banks to terminate relations with regional banks and/or jurisdictions is a key challenge and force shaping Caribbean banking.
“With the pace of innovation, Caribbean banks are at the same time faced with the challenge of keeping up with the demand to provide faster and easier-to-access technology-based services in the digital age. This is particularly critical given the global nature of the financial system.
“The need to invest in new technology to keep pace with innovations and the global trends in financial services calls for significant capital investments and comes with the additional obligation to secure the system from cyberattacks and illicit use.”
Moreover, where de-risking is affecting the access of Caribbean banks to the international payments system, Fintechs are providing an additional challenge for Caribbean banks. Where Fintechs initially provided technology to support the back-end systems of banks and other financial systems, they are now providing financial services.
Today Fintechs have expanded to provide various financial services, such as mobile payments, online lending, credit card issuance, a blockchain-based global settlements network and crowdfunding platforms that allow Internet and app users to send or receive money from others on the platform.
He said the challenges of de-risking, of the pace of innovations and of Fintechs, along with related increased compliance and cybersecurity cost, are important forces shaping Caribbean banking.
“They are in effect changing the operating environment of banks and other financial institutions. Considering the important role banks play in the socio-economic development of the region’s economies, it is imperative for the region’s banks and governments to continue to seek effective solutions to these challenges in the interest of the public.”
The governor wished everyone a fruitful and enjoyable conference as they discuss and review the issues shaping Caribbean banking – issues which, he said, are vital to countries’ balanced and sustainable development.
Source: The Daily Herald https://www.thedailyherald.sx/islands/92146-holiday-says-govts-should-urgently-address-fatf-compliance-gaps
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