“DE-RISKING” OR THE WITHDRAWAL OF

CORRESPONDENT BANKING RELATIONSHIPS

Michelle Francis-Pantor, Deputy Inspector

Central Bank of Trinidad and Tobago

www.central-bank.org.tt; email: info@central-bank.org.tt

© Central Bank of Trinidad & Tobago, 2019

BACKGROUND

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Correspondent

Banking relationships

(CBRs) are critical for

access to the global

payments and financial

systems.

Certain international banks

have been either terminating

or severely limiting their

CBRs with smaller banks

from jurisdictions around the

world. A phenomenon known

as “De-risking”.

Studies show that

Latin America and the

Caribbean are the

regions most severely

affected by “De-

risking”.

DRIVERS OF “DE-RISKING”

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Excessive penalties

imposed on international

banks for non-compliance

Profitability vs

increased costs of

compliance

Economic and trade

sanctions

Unsatisfactory

implementation of

global standards for

e.g. AML/CFT or tax

transparency

INTERNATIONAL LISTS

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Concerns about

perceived ‘higher

risks’ due to the

country being named

on international lists

04 Implementing measures to monitor NPOs on the

basis of risk

03 Completing the legislative efforts to enhance the

processing of ML charges before the courts

02 Addressing issues related to transparency and

beneficial ownership

01 Adopting and implementing the remaining

measures to further enhance international

cooperation

INTERNATIONAL LISTS

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Concerns about

perceived ‘higher

risks’ due to the

country being named

on international lists

IMPACT OF DE-RISKING

6 Increased cost of doing business

Longer processing times e.g. wires

International banks reducing regional footprint

Potential loss of confidence

Movement to unregulated payment options

Restrictions in types of transactions

Shadow economy

IMPLICATIONS

HAS TRINIDAD AND TOBAGO BEEN AFFECTED?

At least 1 out of

6 respondent

banks has lost 1

CBR.

Based on the

2016 IMF Survey

Listed by FATF

and the EU Some banks

have reported

certain

jurisdictions

have rejected

their wire

transfers.

Four banks

reported an

increase in

correspondent

banking fees

between

(20-45%).

Most affected:

international

wire transfers,

cheque clearing

and bank drafts.

At least 3 banks

have de-risked

customers due to

concerns raised

by their

correspondent

banks.

Some banks are

subject to

increased

processing fees

and added due

diligence

measures on

transactions.

Banks have seen

an increase in

the due diligence

scrutiny on their

AML processes.

WHAT IS TRINIDAD AND TOBAGO DOING?

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Civil Asset

Recovery and

Management

and

Unexplained

Wealth Act

Tax information

Exchange

Agreements

(USA) Act, 2017

Various

legislative &

judicial reforms

Income Tax

(Amendment)

Act No. 18 of

2018

Companies

(Amendment)

Act, 2018

NPO Act,

2019

Since November 2017, the country has either amended legislation or enacted

new legislation to address AML/CFT and tax transparency gaps.

WHAT IS CENTRAL BANK DOING?

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REGULATOR/SUPERVISOR

Ensure licensees comply

with AML/CFT

obligations; issue

guidelines and conduct

outreach.

1 2

3 4

ADVOCACY

Contribute to

strengthening AML/CFT

framework as member of

the National AML/CFT

Committee.

COLLABORATION

With regulators and

through regional and

international forums to

address de-risking. MONITOR

Impact of listings on

individual financial

institutions via BATT as

well as the financial

system as a whole and

any emerging financial

stability issues.

THE WAY FORWARD – NATIONAL INITIATIVES

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Standards

AML/CFT framework

Fintech

Forums

AML/CFT

Ensuring a robust AML/CFT

regulatory framework which

satisfies the FATF Standards

through inter alia:

• The passage of legislation;

• Implementation of effective

policies, procedures and

systems that ensure compliance.

GLOBAL FORUM

Ensuring compliance with Global

Forum Standards on tax

transparency.

FORUMS

Participation at all relevant forums to

influence decisions impacting the

country and the region: such as

CFATF and FATF plenaries;

CARICOM Heads of Government

Intercessional meetings.

FINTECH INITIATIVES

Exploration of fintech initiatives

and other technology solutions to

improve KYC/CDD.

“WE NEED TO STEER THE BOAT, NOT DRIFT!”

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“To reach a port, we must sail sometimes with the wind and sometimes against it—

but we must sail, and not drift, nor lie at anchor.”….

Great American poet, Oliver Wendell Holmes Sr.

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THANK YOU