Financial Institutions Urged to Safeguard Operations

Financial institutions are being encouraged to implement measures to safeguard their operations against regulatory and reputational risks.

Finance and Public Service Minister, Hon. Audley Shaw,  says this is necessary as there has been de-risking of institutions involved in correspondent banking, where threats posed by money laundering and terrorism financing are deemed to be imminent.

He  said that proactivity by financial institutions is imperative, even as the Government remains steadfast in its commitment to the continued implementation of polices consistent with an efficient and sound global financial system.

The Minister was speaking at the Jamaica Micro Financing Association’s (JaMFA) conference at the Jamaica Pegasus Hotel in New Kingston, on November 10.

Mr. Shaw said that in formulating policies and the legal framework, the administration had to be mindful of Jamaica’s responsibility to comply with international Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) obligations, particularly in light of the escalating de-risking challenges facing local financial institutions.

The Minister noted that  the World Bank reported that 75 per cent of large international banks surveyed demonstrated declining correspondent banking relationships.

Additionally, he said the institution found that the Caribbean is the region most affected by this development.

“These developments clearly demonstrate that the landscape for global finance is undergoing some structural shifts, which will inevitably create some winners and losers,” the Minister added.

Mr. Shaw  said this represents a “very dangerous situation” for Jamaica, where approximately 40 per cent of economic activity is informal.

“If this kind of de-risking and delinking of formal relationships continue, then it could end up with the economy becoming more informal,” he added.

The Minister highlighted the challenges which de-risking posed, during discussions with officials at last month’s World Bank meeting in Washington, D.C.

Mr. Shaw pointed out that Jamaica  is “leading the way” in the Caribbean in terms of policy implementation that supports en efficient and sound global financial system.

He said that while effective external regulation and supervision from regulatory bodies are important for maintaining a healthy financial system, no amount of external oversight can replace accountability stemming from proper governance and supervision carried out by institutions.

“In other words, take responsibility for your own formality and transparency,” Mr. Shaw emphasised.