WASHINGTON, Oct. 9, CMC – Managing Director of the International Monetary Fund (IMF), Christine Lagarde, has praised the Eastern Caribbean Central Bank (ECCB) on its effort to address problems related to the withdrawal of international correspondent banks.
In an address at the ‘High-Level Seminar on the Latest Trends in Correspondent Banking Relationships Seminar’ Lagarde said the issue does not only impact governments and financial institutions negatively, it also has an impact on the flow of remittances, adding that if not addressed, this issue could among others, have an effect on financial stability, inclusion and growth as well on development goals.
She pointed to what she referred as the “bold steps” taken by the Eastern Caribbean Currency Union (ECCU) to consolidate their national AML/CFT regulatory bodies into one regional operation under the ECCB.
“That’s a way to address the issue,” noting that the challenge for many countries “is not so much the legal framework, but actually the implementation of the AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism)-frameworks”. The IMF chief said while several IMF member states already have the legal framework in place, they lack the technical capacity to enforce the measures.
During the seminar , ECCB Governor, Timothy Antoine, painted a stark picture of the negative impact the withdrawal of international banks has in the Caribbean.
He said it is becoming extremely difficult for governments, financial institutions, companies and individuals in some countries to execute international transactions.
In commenting on the issue, the Governor of the Central Bank of Suriname, Glenn Gersie told the Caribbean Media Corporation (CMC), that if the problems are not being resolved in a timely fashion this would result in “serious” problems for the economy of the region. “It is a huge problem that if not addressed properly can create a lot of damage in developing countries,” he said.
Meanwhile several banks in countries faced with the withdrawal of international correspondent banks, have been upgrading their internal AML/CFT compliance frameworks.
Lagarde noted that these banks have strengthened their customer due diligence policies and have also upgraded the promptness and quality of their replies to requests for information from external authorities.
“These are all extremely positive steps, but they were often not enough to restore banking relations or even prevent the threat of further exits”, Lagarde said.
She said some banks have managed to find replacement banking relationships or made greater use of remaining ones, while others have found temporary arrangements to process international transactions with the help of some major credit card companies or by using alternative currencies.
In both instances however the costs of such operations have significantly increased.
The IMF chief urged banking and government officials to keep the dialogue with the international banks and regulators open and exchange ideas on best practices that will ultimately resolve the problems related to correspondent banking or clear misconceptions.