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Compliance Challenges and Strengthening Correspondent Banking Relationships

Background:

Banks and financial institutions around the world are facing increasing and complex regulatory requirements and increased scrutiny of their compliance frameworks, particularly with regard to AML/CFT issues. This complex and highly demanding global regulatory environment places more requirements on the correspondent banks. At the same time, it leads to a dilemma of how banks can meet compliance requirements on the one hand, and to expand financial inclusion, financing small and medium-sized enterprises and entrepreneurs, facilitating remittance flows, and financing trade and investment, on the other hand. There is no doubt that money laundering and terrorism financing crimes are among the most serious financial crimes with severe repercussions on the economy and society, as they are the common factor for most crimes and illegal acts. Therefore, preventing money laundering and terrorism financing is of utmost importance, but the same attention should be devoted to other economic and social priorities, such as growth, employment, and social and human development.

The international legislative and regulatory pressures over the past years have led to the emergence of the de-risking phenomenon, whereby many international correspondent banks have cut completely the relationships with countries, regions, or banks, whether based on compliance considerations and concerns about money laundering and terrorism financing risks, or for cost-benefits considerations associated with providing correspondent banking services. These measures have deprived geographical, economic, and social sectors of financial services, especially with regard to cross-border money transfers and remittances. Some evidence indicates a possible return of the de-risking phenomenon and cutting correspondent banking relations, as a result of the international banks’ concerns about the inability of local banks to meet the new compliance requirements, also the inability of national supervisory bodies to periodically carry out inspections and audits within banks due to social distancing necessities, and where some of these processes and procedures are executed remotely, which may lead to additional challenges in the monitoring and auditing processes. Consequently, the international correspondent banks may cancel or freeze their relationships with countries or banks because of mounting concerns about the inability of banks (as well as the supervisory and regulatory authorities) to meet their requirements.

In light of the fears of declining confidence by international correspondent banks in compliance procedures and combating financial crimes carried out by national banks and supervisory bodies, and the possibility that the Arab region will be exposed to cutting correspondent banking relations, the Union of Arab Banks seeks to hold a forum entitled “Compliance Challenges and Strengthening Correspondent Banking Relationships”, with the aim of shedding light on the new requirements of correspondent banks and the challenges in combating financial crimes and cybersecurity risks arising from remote working and the expansion of financial technology. In addition to risks related to the Arab region, which leads to an increase in reputation risk.

Objectives:

This forum constitutes a high-level platform that brings together high-level representatives from Arab and international financial and regulatory bodies, to discuss the international legislative and regulatory developments, and the possibility of the emergence of a de-risking phenomenon. The forum also seeks to discuss the current banking measures to enhance monitoring and compliance. In addition, the regulatory authorities’ policies aimed at maintaining robust audit and control procedures will be highlighted.

Topics of Discussion:
1- Challenges & opportunities for Arab banks to understand and meet the expectations of the US supervisory authorities and correspondent banks.

2- Shedding light on the new international legislations related to combating money laundering and terrorism financing.

3- How to meet new compliance requirements and maintain relationships with correspondent banks.

4- The supervisory authorities’ procedures for auditing and controlling banking operations.

5- The possible increase in compliance, money laundering, and terrorist financing risks in light of the existing compliance and supervisory procedures.

6- Balancing between the benefits and challenges of digitization and the increased reliance on technology.

May 27 2021

Venue

Coral Beach Hotel & Resort

Beirut, Lebanon

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Compliance Challenges and Strengthening Correspondent Banking Relationships

Background:

Banks and financial institutions around the world are facing increasing and complex regulatory requirements and increased scrutiny of their compliance frameworks, particularly with regard to AML/CFT issues. This complex and highly demanding global regulatory environment places more requirements on the correspondent banks. At the same time, it leads to a dilemma of how banks can meet compliance requirements on the one hand, and to expand financial inclusion, financing small and medium-sized enterprises and entrepreneurs, facilitating remittance flows, and financing trade and investment, on the other hand. There is no doubt that money laundering and terrorism financing crimes are among the most serious financial crimes with severe repercussions on the economy and society, as they are the common factor for most crimes and illegal acts. Therefore, preventing money laundering and terrorism financing is of utmost importance, but the same attention should be devoted to other economic and social priorities, such as growth, employment, and social and human development.

The international legislative and regulatory pressures over the past years have led to the emergence of the de-risking phenomenon, whereby many international correspondent banks have cut completely the relationships with countries, regions, or banks, whether based on compliance considerations and concerns about money laundering and terrorism financing risks, or for cost-benefits considerations associated with providing correspondent banking services. These measures have deprived geographical, economic, and social sectors of financial services, especially with regard to cross-border money transfers and remittances. Some evidence indicates a possible return of the de-risking phenomenon and cutting correspondent banking relations, as a result of the international banks’ concerns about the inability of local banks to meet the new compliance requirements, also the inability of national supervisory bodies to periodically carry out inspections and audits within banks due to social distancing necessities, and where some of these processes and procedures are executed remotely, which may lead to additional challenges in the monitoring and auditing processes. Consequently, the international correspondent banks may cancel or freeze their relationships with countries or banks because of mounting concerns about the inability of banks (as well as the supervisory and regulatory authorities) to meet their requirements.

In light of the fears of declining confidence by international correspondent banks in compliance procedures and combating financial crimes carried out by national banks and supervisory bodies, and the possibility that the Arab region will be exposed to cutting correspondent banking relations, the Union of Arab Banks seeks to hold a forum entitled “Compliance Challenges and Strengthening Correspondent Banking Relationships”, with the aim of shedding light on the new requirements of correspondent banks and the challenges in combating financial crimes and cybersecurity risks arising from remote working and the expansion of financial technology. In addition to risks related to the Arab region, which leads to an increase in reputation risk.

Objectives:

This forum constitutes a high-level platform that brings together high-level representatives from Arab and international financial and regulatory bodies, to discuss the international legislative and regulatory developments, and the possibility of the emergence of a de-risking phenomenon. The forum also seeks to discuss the current banking measures to enhance monitoring and compliance. In addition, the regulatory authorities’ policies aimed at maintaining robust audit and control procedures will be highlighted.

Topics of Discussion:
1- Challenges & opportunities for Arab banks to understand and meet the expectations of the US supervisory authorities and correspondent banks.

2- Shedding light on the new international legislations related to combating money laundering and terrorism financing.

3- How to meet new compliance requirements and maintain relationships with correspondent banks.

4- The supervisory authorities’ procedures for auditing and controlling banking operations.

5- The possible increase in compliance, money laundering, and terrorist financing risks in light of the existing compliance and supervisory procedures.

6- Balancing between the benefits and challenges of digitization and the increased reliance on technology.

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