Page 33 - Islands Business October 2023 edition

Banking

Australia’s Assistant Treasurer and Minister for Financial Losing correspondent bank relationships can impact the accessibility and
Services, Stephen Jones. affordability of banking services in our region and make Pacific Island
nations less attractive investment and trade partners.

DE-BANKING HAVING A ‘SEVERE

IMPACT’ ON PACIFIC ISLANDERS

By Samantha Magick Meeting (FEMM) in Fiji said correspondent banking services in
our region continue to decline, although the situation is worse
The region’s economic ministers say the expiry of for some countries. And while the region has been working to
correspondent banking relationships (CBR) is having a severe reduce risks, resulting in “strengthened integrity frameworks
impact on the lives of Pacific Islanders, including seasonal and regulations, improved data collection and management,
workers, micro, small, and medium enterprises, and other and better compliance with enforcement capacity, they have
vulnerable groups. not had a clear impact on reversing the de-risking tide.”
But the underlying causes of ‘de-banking’ are not going Losing correspondent bank relationships can impact the
away, says Australia’s Assistant Treasurer and Minister for accessibility and affordability of banking services in our region
Financial Services, Stephen Jones. and make Pacific Island nations less attractive investment and
The drivers of de-banking include the risks—real and trade partners.
perceived—of money laundering, financing terrorism and A World Bank study has found that while the level of
(weapons) proliferation financing. The increasing burden criminal threat in the Pacific Islands is lower than the norm,
of compliance with Anti Money Laundering/Combatting the “Pacific jurisdictions may be exploited as transit jurisdictions
Financing of Terrorism (AML/CFT) regulations is a major or to hide beneficial ownership.”
contributor, as is the reputational damage when banks incur Furthermore, Pacific jurisdictions are considered vulnerable
large fines and weapons proliferation financing offences. as the levels of compliance with Financial Action Taskforce
In our region, changes in a bank’s business strategies can (FATF) standards may be low. The FATF is the global money
also be a factor, as banks look to streamline and simplify laundering and terrorist financing watchdog of which
operations, reduce the costs of compliance, and move out of Australia, New Zealand, France, India, the US, and others are
smaller, less profitable markets. members.
A paper to August’s Pacific Islands Forum Economic Ministers Data collected between 2011-2022 showed almost all

Islands Business, October 2023 33