The potential loss of correspondent banking accounts in the United States is dominating conversations among Caribbean bankers recently, especially since a number of American financial institutions have terminated many of those longtime relationships. It is perhaps the most pressing problem bankers in that region face. is there a viable solution ? Yes, there is.
The US banks, operating under risk-based compliance programs, are reducing risk wherever possible, and the Caribbean which, through the accident of geography is both a transit zone for narcotics, and a favored money laundering destination. unless the Caribbean financial institutions have a means of assuring the onshore US banks that their clients/customers are all legitimate, correspondent relationships, even those which have been maintained for decades, are at risk.
The American banks need to know who your customers are, in essence, Know Your Customer's Customer, or KYCC is the solution. Armed with this knowledge, the risk managers can ascertain whether any of the Caribbean bank's own customers pose a threat, and should be terminated. This procedure also helps the Caribbean bank reduce its own risk level, and therefore improve anti-money laundering, and countering the financing of terrorism programs.
New technological advances in compliance programs allow users to identify unsatisfactory, or high-risk customers, or good customers who later have issues which raises their risk levels, as well as all your low-risk clients who should be retained. Space on this blog does not permit an adequate and illustrated description of those programs, and why they are an acceptable means of restoring your correspondent's confidence in your client base, and AML/CFT program, but if any readers are not familiar with those programs, feel free to send me an email at: firstname.lastname@example.org with your query, and I will respond to you in detail.
While it is the Caribbean banks that are reporting the most terminations of correspondent relationships, a recent report from other areas of the developing world also that similar situations were occurring in Latin America, Asia & Africa. We hope that those banks also choose an effective solution, before they also suffer what might be a catastrophic loss in correspondent relationships.