Members of AFI’s Pacific Islands Regional Initiative (PIRI) agreed to implement a regional de-risking action plan aimed at curbing losses in correspondent banking relationships due to concerns over money laundering and terrorist financing.
Organized in collaboration with AFI partners Asia/Pacific Group on Money Laundering (APG) and Society for Worldwide Interbank Financial Telecommunications (SWIFT), the workshop was held on the sidelines of the South Pacific Central Bank Governors meetings in Sydney on 20 – 21 November.
Representatives from seven PIRI jurisdictions – Fiji, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste, Tonga, and Vanuatu – were among the nearly 40 participants attending from across the Pacific. Others included non-members from the Marshall Islands and the Cook Islands, international development organizations, financial technology firms and academia.
The action plan aims to mitigate or reverse the impact of a withdrawal of banking services from money transfer operators serving small island state economies in the region, and a decline in correspondent banking relationships between regional players and international payment systems.
Participants agreed that its four key pillars will be diagnostics and monitoring frameworks for tracking progress; compliance with AML/CFT standards and risk assessment; inter-regulator and stakeholder coordination and data sharing; and technology-based solutions.
To accelerate the implementation of the action plan, PIRI member and partners discussed establishing a Pacific de-risking data taskforce focusing on data disaggregation and granularity, as well as enhanced coordination and information sharing on Pacific de-risking projects and initiatives. They also encouraged better implementation of good practices in money laundering and terrorist financing risk assessments, expanding the supply of regional anti-money laundering and counter-terrorist financing capacity building opportunities and tools, and developing a regional regulatory sandbox.
De-risking, or de-banking, is a critical issue that affects the financial inclusion goals of many AFI members, particularly small island states. Despite increased attention given to the issue over the last five years, progress in stemming or reversing the trend has been slow and projects designed to tackle the issue are often pursued in silos and without effective coordination or country leadership.
The workshop is a continuation of the 10th PIRI meeting held in June, where members endorsed the development of a regional de-risking action plan that harmonizes efforts and drives the formulation and implementation of national action plans to reverse or stem de-risking. The action plan aims for significant progress by the next bi-annual meeting of PIRI leaders in May 2020.
AFI is an observer organization of APG and collaborates with it on training events and other assistance.
The workshop was partially funded by UK aid from the UK government.