On December 19, 2016, the Financial Stability Board published an updated progress report outlining its action plan to assess and address the decline in correspondent banking. Correspondent banking relationships enable banks to access financial services in different jurisdictions and provide cross-border payment services to their customers. There has been an increasing concern about the decline in the number of correspondent banking relationships because the ability to send and receive international payments could be impacted, which may have repercussions on growth and the stability and integrity of the financial system. The FSB presented a four point action plan to the G20 in November 2015. The progress report describes the progress that has been made and outlines the deliverables for 2017 to further address the issues.
Among the actions listed, the FSB is to publish a report in April 2017, outlining the findings from its recent survey on correspondent banking and from the end-2016 update of SWIFT data. By March 2017, the FSB will publish suggested main elements (in terms of both contents and modalities) of a communication strategy that jurisdictions could follow in an effort to build trust by communicating the steps taken to improve their anti-money laundering/counter-terrorist financing frameworks and the quality of their supervision of financial institutions. The FSB will continue its discussions with SWIFT and, by April 2017, will publish the process and scope of data for the ongoing monitoring of trends in correspondent banking. The Basel Committee will also publish its revised guidance on correspondent banking by June 2017. The Basel Committee launched a consultation on the proposed revisions to its guidance to confirm regulatory expectations on the assessment of money laundering and financing of terrorism risks in correspondent banking.
The proposed revisions to the guidelines develop the application of a risk-based approach for correspondent banking relationships, including recognizing that not all correspondent banking relationships carry the same level of risk, and also clarify expectations regarding the quality of payment messages and the conditions for appropriate use of "know your customer" (KYC) utilities. The consultation closes on February 22, 2017. The consultation follows the publication by the Financial Action Task Force of its guidance on correspondent banking on October 21, 2016.
The FSB action plan is available at: http://www.fsb.org/wp-content/uploads/FSB-action-plan-to-assess-and-address-the-decline-in-correspondent-banking.pdf.
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