The International Monetary Fund (IMF) has suggested that major global banks should look for ways to reverse the trend of eliminating correspondent banking relationships (CBR) with smaller economies.

In a report released on 30 June, IMF researchers found that smaller states in Africa, the Caribbean, Central Asia and Pacific islands have been badly affected by global banks' decisions to withdraw from some of these relationships.

AML/CFT compliance

The IMF says it was major banks' desire to reduce risks associated with anti-money laundering (AML) or countering the financing of terrorism (CFT), to comply with international sanctions or reduce regulatory compliance costs that had made such business unattractive.

According to the IMF, such reductions in CBRs could lead to fewer banking channels for transactions in US dollars or other reserve currencies, and could hamper lending and economic growth.

L/C bundling

Amongst other suggestions, the IMF said major banks could look to ways to mitigate compliance costs associated with CBRs.

One potential solution could be for global banks to bundle financial services, such as letters of credit, credit card clearing and wealth management products with CBRs to spread compliance costs over more services.

Amongst other suggestions, the IMF said US banks could pool compliance resources or build common transaction platforms or share more information about customers.

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