The complaints about what is called "de-risking" continue to roll in, especially from the financial institutions in the Caribbean. Those banks bitterly relate tales of abrupt cancellation of long-term correspondent relationships with American & Canadian financial institutions, and their often desperate quest to find alternatives, not to learn that the increased costs will probably have to be passed along to the class of client who can least afford it, expats Sending remittances, and the recipients of those payments.
It is not a conundrum, the affected banks all have access to programs* that create the Know Your Customers' Customers, or KYCC, that American banks now demand. if I am a compliance officer in a New York bank, I want to have immediate access to the Caribbean bank's customer; his transactions, personal information, account history, lines of business business, basically all those things that are part of his client story, so that I may reduce my risk of being involved in his US transactions.
Compliance officers know, or should know, that KYCC programs can be installed which give the USA and/or Canada bank a window into the Caribbean Banks' customers, their records, and their transactions, on a real-time basis. Unfortunately, due to cost concerns, fears about losing clients to local competitors, and pressure from clients to maintain confidentiality, most Caribbean banks fail to engage in KYCC programs, and their eventual loss of correspondent relationships, due to increasingly intrusive regulatory actions against US banks and bankers, is only a matter of time.
My advice to compliance officers at Caribbean financial institutions, adopt a program that affords the onshore US and/or Canada banks KYCC access to your clients' information before you get the final notice of impending closure of your prized correspondent accounts in New York. Loss of access to the US banking structure, even temporarily, can result in massive client flight, and eventual insolvency. Pay attention, and solve this problem, before your bank becomes a fatality of de-risking.
Chronicles of Monte Friesner - Financial Crime Analyst
Contributed by Kenneth Rijock - Financial Crime Consultant