The Financial Stability Board (FSB) published its latest progress report on the implementation of its action plan to assess and address the decline in correspondent banking.
The decline in the number of correspondent banking relationships is described by the FSB as a “source of concern for the international community because it may affect the ability to send and receive international payments, or drive some payment flows underground, with potential consequences on growth, financial inclusion, as well as the stability and integrity of the financial system”. The FSB therefore feels that this merited an action plan underpinned by the following four elements:
- Further examination of the dimensions and implications of the issue;
- Clarifying regulatory expectations, including more guidance by the FATF;
- Domestic capacity-building in jurisdictions that are home to affected respondent banks; and
- Strengthening tools for due diligence by correspondent banks.
The FSB established in March 2016 the Correspondent Banking Coordination Group (CBCG) to coordinate and maintain impetus in the implementation of the action plan. Certain actions have already been taken during 2016, which include FATF guidance on correspondent banking and updated guidance from the Basel Committee on Banking Supervision, a survey by the FSB of national authorities and banks to collect additional information on correspondent banking, a roundtable discussion between the FSB, the International Monetary Fund and the World Bank to discuss steps that need to be taken to address this issue, and a survey by the Wolfsberg Group on existing training and capacity building activities for respondent banks.
During 2017, it is envisaged that the CBCG will up its data collection and analysis efforts in order deepen its ongoing monitoring of trends in correspondent banking and develop a global framework for more systematic data collection at country level. More guidance in the area of correspondent banking is also expected in order to support common understanding amongst relevant agencies, supervisory staff and banks. Capacity-building activities are expected to be strengthened through a range of technical assistance and other activities, such as drafting legislation, subordinate regulations and supervisory guidelines or manuals, hands-on training of supervisory staff on how to monitor AML/CFT standards and for general supervision of institutions, training of law enforcement on how to investigate money laundering or large-scale corruption, and assisting countries in conducting self-assessments of their AML/CFT risk management framework and tools. Further, the FSB intends to consider how technological innovations, such as big data and machine learning, might be usefully applied in generating and analysing information and facilitating due diligence processes.
The full progress report can be accessed here.