IMF praises Eastern Caribbean for tack­ling cor­re­spon­dent bank­ing is­sues

The Star (St. Lucia) - - CLASSIFIED - By Ivan Cairo Source: Caribbean News Now con­trib­u­tor

As the In­ter­na­tional Mon­e­tary Fund (IMF) wrapped up its an­nual meet­ing in Wash­ing­ton, DC, last week­end, man­ag­ing di­rec­tor Chris­tine La­garde praised the Eastern Caribbean on its ef­fort to ad­dress prob­lems re­lated to the with­drawal of in­ter­na­tional cor­re­spon­dent banks.

In her ad­dress at the 'High-Level Sem­i­nar on the Lat­est Trends in Cor­re­spon­dent Bank­ing Re­la­tion­ships', she noted that this is­sue doesn't im­pact only govern­ments and fi­nan­cial in­sti­tu­tions neg­a­tively. It also af­fects the flow of re­mit­tances that in­di­vid­u­als, es­pe­cially peo­ple in re­mote and ru­ral com­mu­ni­ties, de­pend on.

If left un­ad­dressed this is­sue could among oth­ers have an ef­fect on fi­nan­cial sta­bil­ity, in­clu­sion and growth as well on de­vel­op­ment goals, the IMF chief warned.

She noted that one of the good ex­am­ples is the bold steps taken by the Eastern Caribbean Cur­rency Union (ECCU) to ad­dress the is­sue. Govern­ments of this cur­rency union have re­cently de­cided to con­sol­i­date their na­tional anti-money laun­der­ing and com­bat­ing the fi­nanc­ing of ter­ror­ism (AML/ CFT) reg­u­la­tory bod­ies into one re­gional op­er­a­tion un­der the re­spon­si­bil­ity of the Eastern Caribbean Cen­tral Bank (ECCB), La­garde told the gath­er­ing of cen­tral bankers.

“That's a way to ad­dress the is­sue,” she said.

The chal­lenge for many coun­tries, ac­cord­ing to La­garde, “is not so much the le­gal frame­work, but ac­tu­ally the im­ple­men­ta­tion of the AML/ CFT-frame­works”. Many IMF mem­ber states al­ready have the le­gal frame­works in place, she said, but lack the tech­ni­cal ca­pac­ity to en­force the mea­sures.

Mean­while, many banks in the af­fected coun­tries have been up­grad­ing their in­ter­nal AML/CFT com­pli­ance frame­works. They 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 noted.

She fur­ther added that some banks in the af­fected coun­tries 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 how ul­ti­mately the prob­lems re­lated to cor­re­spon­dent bank­ing re­la­tions could be re­solved or clear up mis­per­cep­tions, which are per­sis­tent in some cases.

Dur­ing the panel dis­cus­sion, the gov­er­nor of the ECCB painted a stark pic­ture of the nega­tive im­pact the with­drawal of in­ter­na­tional banks has in the Caribbean. He noted that more and more it is be­com­ing ex­tremely dif­fi­cult for govern­ments, fi­nan­cial in­sti­tu­tions, com­pa­nies and in­di­vid­u­als in some coun­tries to ex­e­cute in­ter­na­tional trans­ac­tions.

Glenn Ger­sie, gov­er­nor of the Cen­tral Bank of Suri­name, said that if the prob­lems are not 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,” Ger­sie said.

Chris­tine La­garde, IMF's man­ag­ing di­rec­tor, dur­ing a sem­i­nar in Wash­ing­ton DC, where cen­tral bankers ad­dressed the is­sue re­gard­ing the with­drawal of in­ter­na­tional cor­re­spon­dent bank­ing re­la­tions, which is also hav­ing a nega­tive im­pact on Caribbean coun­tries.

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