KINGSTON, Jamaica – Externally imposed requirements have had unintended and undesired consequences on Jamaica’s financial institutions, says Tasha Manley, Executive in charge of Compliance for Jamaica National Building Society (JNBS).
Miss Manley was addressing this year’s annual conference co-hosted by the Jamaica Bankers’ Association (JBA) and the Jamaica Institute of Financial Services.
“One recent trend has been for correspondent banks to terminate relationships with certain institutions, customers and sometimes entire industries,” she stated. This is the result of a global push for de-risking among correspondent banks.
On top of this, Financial Institutions have also had to work tirelessly to meet Foreign Account Tax Compliance Act (FATCA) requirements, intended to control tax evasion by those with United States income tax liabilities.
These trends are the culmination of a decision making process that has placed heavy pressure on local institutions, whose compliance efforts have largely been driven by concern about being excluded from the international financial community, she explained to the Anti-Money Laundering/Counter-Financing of Terrorism (AML/CFT) Conference at the Jamaica Pegasus Hotel, on October 12.
With the new thrust for de-risking, correspondent bankers are opting to end relationships with clients and entities deemed high risk due to uncertainty about its business, reputation or the quality of its supervision.
The JNBS head of compliance observed that, “there is a noticeable ambiguity around the criteria for de-risking actions, and a lack of uniformity in its implementation across institutions”.
She quoted the Financial Action Task Force, the international AML/CFT standard setting body, as saying ‘de-risking….is a complex issue that goes far beyond anti-money laundering (AML) and counter-terrorist financing (CFT)…’ but that ‘…there is a continued need to improve the evidence base in order to determine the causes, scale and impact of de-risking.’
Miss Manley further observed that the conundrum facing the Cayman Islands’ financial sector in the wake of the decision to ‘unbank’ money services businesses in that country, is evidence of the extent to which de-risking can undermine financial transparency and financial activity, with associated regulatory, economic and social consequences.
“While we understand that the measures being taken stem from the necessity to protect the stability of the international financial system and to cut off resources to violent extremist groups, it is our firm belief that these have to be implemented with care in order to not to have undesirable outcomes,” she said.
On the other hand, Miss Manley applauded local regulators for the approach they have taken in strengthening the financial services architecture through the enactment of the Banking Services Act (BSA).
“The Act aims to ensure that the local financial services framework was brought into closer alignment with the governing international standards,” the Compliance Executive stated, adding that, “the BSA has brought with it unprecedented opportunities for the industry.”
Apart from establishing a clear governance framework for financial institutions, the Act also offers the opportunity for financial institutions to provide deposit taking and other services through agents.
Pointing to the consistent concern of JNBS General Manager, Earl Jarrett, for the plight of the unbanked in Jamaica, she commended the Bank of Jamaica for introducing the concept of agency banking, because of its potential for achieving, “A greater level of financial inclusion, promoting commercial viability and lowering costs for deposit taking institutions.”
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