This progress report provides an update on the implementation of the FSB’s four-point action plan to assess and address the decline in correspondent banking.
A decline in the number of correspondent banking relationships remains a source of concern for the international community because, in affected jurisdictions, it may impact the ability to send and receive international payments, or drive some payment flows underground, with potential adverse consequences on growth, financial inclusion and international trade. While impacts to the stability and integrity of the global financial system have not been identified, concerns remain at the national and regional level.
The progress report highlights actions taken to implement the FSB’s four-point action plan on correspondent banking since the FSB’s March 2018 progress report. These include:
-
Strengthening tools for due diligence by correspondent banks – To support the measures that could help improve the efficiency of due diligence procedures, reduce compliance costs and help address perceived uncertainty, the FSB, Basel Committee on Banking Supervision (BCBS) and Committee on Payments and Market Infrastructures (CPMI) organised a workshop to discuss the use of Know Your Customer utilities for correspondent banking due diligence, the quality of payment messages and the use of the Legal Entity Identifier in correspondent banking.
Other technical solutions addressing or offsetting the reduced availability of correspondent banking are also being considered, including how technological innovations, such as big data and machine learning, might be usefully applied in generating and analysing information and facilitating due diligence processes.
-
Clarifying regulatory expectations – The Financial Action Task Force (FATF) and BCBS have conducted surveys of their memberships to assess the transmission and traction of their guidance on correspondent banking. While there generally has been a high level of dissemination of the guidance, some national authorities may need to do more.
-
Domestic capacity building – The FSB recently convened a workshop that included representation from the private sector, on the coordination and prioritisation of capacity development to strengthen domestic Anti-Money Laundering and Countering the Finance of Terrorism Public supervision. The FSB has also committed to explore how solutions developed to address the reduction in correspondent banking relationships might also be used in the context of trade finance and, in this context, has discussed with the World Trade Organization, International Finance Corporation and Multilateral Development Banks technical assistance that these organisations provide to private sector banks on trade finance.
With the international components of the correspondent banking action plan largely in place, the steps listed above illustrate that the FSB’s focus is now turning to monitoring of implementation and of developments. Monitoring be undertaken by the FSB’s membership, and in particular the BCBS, CPMI, FATF, Global Partnership for Financial Inclusion, International Monetary Fund and World Bank.