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Impacts on access to financial services

Many contributors have argued that, for KYC utilities to be more effective, in addition to standardising the data and formats, it would be necessary that banks have some assurances from relevant authorities (such as the regulatory, supervisory or law-enforcement authorities) with respect to the appropriateness of and reliance upon any such utility for the purposes of AML/CFT compliance.

Therefore, CPMI invited the authorities with responsibility for AML/CFT (ie the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision AML/CFT Expert Group (AMLEG)) to consider developing a set of issues that financial institutions should consider when using KYC utilities, to support an appropriate use of these utilities.

Following CPMI’s report, the Financial Stability Board (FSB) published in December 2016, a report clarifying how it would proceed to implement its four-point action to assess and address the decline in correspondence banking. The progress report includes a set of deliverables for 2017, including implementation of the action plan. The FSB’s Correspondent Banking Coordination Group (CBCG) has taken the following steps to implement the action plan:

  • A one-off survey of national authorities and banks has been undertaken by the FSB in September to collect additional information on correspondent banking. Authorities in some 50 countries participated in the survey, collecting data on approximately 300 banks. The survey is intended to provide additional evidence to support a deeper understanding of the causes and consequences of the decline in the correspondent banking relationships, and thereby help to inform the policy responses and initiatives underway to address the issue.  
  • The FATF published its guidance on correspondent banking, which clarifies that the FATF Recommendations do not require financial institutions to conduct customer due diligence on the customers of their respondent bank clients (so-called “know your customer’s customer”). The guidance highlights that not all correspondent banking relationships carry the same level of money laundering or terrorist financing risks, hence any enhanced due diligence measures have to be commensurate to the degree of risks identified. The Basel Committee on Banking Supervision (BCBS) published a consultation on revisions to its guidance on correspondent banking to take into account the FATF work and clarify regulators’ expectations in areas such as Know-Your-Customer (KYC) utilities.
  • The FSB, International Monetary Fund and the World Bank held a roundtable bringing together senior representatives of banks with officials from central banks, finance ministries and other public sector bodies. The roundtable discussed steps that need to be taken to address this issue.

A comprehensive set of deliverables for 2017 have been agreed to ensure effective implementation of the action plan. The actions include the following:

  • By April 2017 the FSB will publish findings from the CBCG survey on correspondent banking and the FSB and SWIFT will set out a process for ongoing monitoring of trends in correspondent banking.
  • By June 2017 the BCBS will publish its finalised revised guidance on correspondent banking and the FATF expects to finalise its work on the definition of correspondent banking.
  • Further steps will also be taken by the official sector and the correspondent banking community to share information and support coordination of capacity building.
  • By March 2017 the FSB will publish suggested main elements of communication strategies jurisdictions could implement to effectively communicate the steps taken to improve their frameworks for anti-money laundering and combating the financing of terrorism (AML/CFT) and the quality of their supervision of financial institutions.
  • By June 2017 an action plan will be developed by SWIFT Payments Market Practice Group and the Wolfsberg Group to strengthen market guidance on payment messages used for correspondent banking, and SWIFT and the Global Legal Entity Identifier Foundation are expected to take further steps to contribute to streamlining KYC due diligence.