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    FSB Publishes Reports on Correspondent Banking and Remittances

    March 16, 2018

    FSB published two reports as part of its work to assess and address the decline in correspondent banking relationships: one is a progress report on the FSB action plan to assess and address the decline in correspondent banking and the second report is a stocktake on remittance service providers’ access to banking services. These reports have been delivered to G20 Finance Ministers and Central Bank Governors. FSB also published a short cover note, highlighting key messages to the G20 leaders.

    A decline in the number of correspondent banking relationships remains a source of concern for the international community. This is 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 international trade, growth, financial inclusion, and the stability and integrity of the financial system. The following are the key highlights of the two reports:

    • Progress report on FSB action plan. The progress report highlights actions taken to implement the four-point action plan on correspondent banking since the July 2017 update of FSB. The actions include strengthening tools for due diligence by correspondent banks; data collection and analysis; clarifying regulatory expectations, as a matter of priority, including guidance by the Financial Action Task Force (FATF) and BCBS; and domestic capacity building in jurisdictions that are home to the affected respondent banks. This is the fourth progress report and it follows the earlier reports that were published in August 2016, December 2016, and July 2017.
    • Report on stocktake of remittance service providers’ access to banking services. The report identifies intertwined drivers for the termination of banking services to remittance service providers, including profitability, the perceived high risk of the remittance sector from an anti-money laundering/counter terrorism financing (AML/CFT) perspective, supervision of remittance service providers, and, in some jurisdictions, weak compliance with international standards, particularly those relating to AML/CFT. FSB, Financial Action Task Force, Global Partnership for Financial Inclusion, IMF, and World Bank will coordinate to monitor take-up of the recommendations of this stocktake effort and report back to the G20 in July 2019. The report makes 19 recommendations in four areas to address gaps and remaining barriers to banking services by remittance service providers. The four categories of recommendations are:
      • Promoting dialog and communication between the banking and remittance sectors
      • Improving implementation of international standards and oversight of the remittance sector
      • Use of innovation in the remittance sector and its possible role in enabling remittance service providers’ greater access to banking services
      • Technical assistance related to remittances

     

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    Keywords: International, Banking, Correspondent Banking, Progress Report, Recommendations on Remittances, AML/CFT, FSB

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