WILL PROPOSED FINCEN PERPETUAL RISK ASSESSMENT REQUIREMENT BE THE DEATH KNELL FOR CORRESPONDENT BANKING AS WE KNOW IT?

Much has been written of late regarding the future FinCEN requirement mandating creation of a continuing risk assessment capability at your bank, which would be charged with effectively, and perpetually, evaluating risk as events unfold. Nowhere is such a duty as critical as currently exists, regarding correspondent accounts maintained by US banks for indigenous Caribbean financial institutions and NBFIs. Risk levels for those specific types of accounts have been known to approach dangerous levels, due to rampant suspected money laundering, deposits of suspected corrupt Politically Exposed Persons (PEPs),funds believed to represent the Proceeds of Crime, possible terrorist financing, CBI deposits, and a host of other categories of payments that have a habit of originating in the Caribbean, where effective in-house AML/CFT compliance often does not meet Banking Best Practices minimum standards.

It is feared that this new, elevated requirement will result in abrupt and permanent De-Risking, meaning closure of correspondent accounts with Caribbean banks deemed ineffective as gatekeepers, and which thereby expose American banks to civil fines & penalties, or worse, for suffering the AML violations observed by the new Risk Assessment team. Whereas before, the threat did not directly require immediate action, how can a US bank that sees the problem not now be forced to act?

I am wondering how the eventual mandatory implementation of the independent Risk Assessment team can result in anything other than a crackdown on the region's dodgy banks, where political considerations, the profit motive, and a smug feeling that the current American regulatory policy which discourages De-Risking even when it is richly deserved, may now find out, the hard way, that their sub-standard compliance department has cost them their valuable correspondent accounts in New York and Miami. I frankly see no other probable outcome. What will 2025, and the effective date of those new FinCEN rules bring? If I am a senior executive at a Caribbean bank, I am surely afraid of the answer.