Legislation designed to clamp down on financial crime is growing worldwide, but compliance with stricter regulation is expensive. In an interview with Global Risk Regulator – the Financial Times publication specialising in financial regulation – Richard Jones, CEO of Crown Agents Bank, and Doug MacLennan, Crown Agents Bank’s director and chief risk officer, offer their insights into this regulatory trend, the rising costs of compliance, and how banks and regulators are dealing with the situation.
Jones explains that as the costs of compliance “have increased very significantly”, global banks have sought to reduce their exposure to higher-risk jurisdictions – in large part, this means the emerging markets of Africa and the Caribbean. Of course, scaling back from these regions threatens to cut them off from the wider financial system, and poses serious implications for those developing countries whose economic growth and populations rely on financial inclusion for trade finance and remittance flows.
In order to navigate such a challenging environment, Jones stresses that global banks must “demonstrate that they comply with the rules”, and “document their compliance with global standards”. He adds that they need to “make a commitment towards getting to know their customers” and be prepared to “make a judgement about taking on, or indeed retaining, some of them”.
MacLennan adds that regulators in emerging markets are playing their part to increase transparency on risks and tackle those that may dissuade foreign baking partners. “In the last few months, we’ve seen regulators in Africa and the Caribbean become hugely committed to ensuring Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) legislation is in force and enforced.”
The article may be read here (with a subscription).