FSB published the third report to G20 Leaders detailing progress on its action plan to assess and address the decline in correspondent banking. FSB also released a data report that provides new data on the trends, drivers, and effects of the decline in the number of correspondent banking relationships.
The progress report highlights further actions taken since the previous progress report, which was published in December 2016. These actions were taken across different elements of the action plan being coordinated by the FSB’s Correspondent Banking Coordination Group and include:
Enhanced analysis on the decline of correspondent banking relationships
Issuance, by BCBS, of the revised guidelines on sound management of risks related to anti-money laundering and combating the financing of terrorism (AML/CFT), following up on the guidance on correspondent banking published last year by the Financial Action Task Force
Further coordination of official-sector support for capacity-building in jurisdictions that are home to affected respondent banks’ activities
Work by CPMI to strengthen tools that may contribute to reducing due diligence costs for correspondent banking relationships.
The data report provides analysis on the decline in correspondent banking. The data report contains information collected from FSB survey of over 300 banks in nearly 50 jurisdictions plus data provided by the Society for Worldwide Interbank Telecommunications (on payment traffic over SWIFT). These data show that the decline in the number of correspondent banking relationships is continuing across all continents, although to a varying degree. However, the decline is more pronounced for U.S. dollar and euro transactions. The decline in relationships appears to lead to a greater concentration where countries and banks rely on fewer correspondent banks and longer payment chains, which means that an increasing number of intermediaries are involved in processing the same payment. Relationship are most affected in smaller countries and jurisdictions, for which the compliance with standards for AML/CFT is insufficient or unknown. A decline in the number of correspondent banking relationships is a concern because in impacted jurisdictions it may affect the ability to send and receive international payments or drive payments underground with potential adverse impacts for trade, growth, financial inclusion, financial stability, and the integrity of the financial system.
Keywords: International, FSB, Banking, Correspondent Banking, AML/CFT, Report