Friday, December 14, 2018


 De-Risking happens when a bank in New York or Toronto fears that its correspondent in Antigua or St Kitts or Dominica cannot be trusted to maintain an effective AML/CFT compliance program. It has a recurring nightmare about being publicly named & shamed by regulators, when the Caribbean bank's client, a Specially Designated Global Terrorist, or narcotics Cartel kingpin, or Russian organized crime oligarch, is found to have held accounts at the bank for years, moving dirty money ad nauseum  to Beirut, Moscow or Panama City. In order to prevent this nightmare from coming true, the NY bank drops the Caribbean correspondents hard, forcing them to find extremely expensive alternate arrangements in Europe, which will not only cost their clients more money, they will involve delays in funds transfers.

The solution of course if KYCC, Know Your Customers' Customers. This means that the onshore correspondent is given a window into all the transactions of the clients of the Caribbean bank. Programs that afford the onshore US or Canadian bank total access to the offshore bank's clients, including their transactions, not only exist and are available, but can be acquired at modest cost, as the bank's customers each pay a nominal administrative fee to defray the administrative costs of running the program.

Here's the problem: the Caribbean banks have not obtained the program. The reason; most likely the banks do not want their dodgy (read: criminal narcotics trafficking ) clients' transactions known to their New York correspondent. We have previously even named the program that solves any potential De-Risking problem,* but the banks, and their owners, have not acted. What will thereafter happen is increased De-Risking, and the loss of those prized correspondent accounts.

the next time you read about a banker in the Caribbean complaining about the unfairness of De-Risking, remember what you have read here.
* Global Risk and Data Authority, Grand Cayman (GRADA)

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.