The International Monetary Fund indicated that the decline in global correspondent banking relationships (CBRs) has disproportionally affected banks and money transfer operators (MTOs) in Sub-Saharan Africa (SSA). It said that the limited ability of some banks and MTOs in small and fragile SSA countries to access the global payments system has negatively impacted trade and remittance flows, and weighed on the growth prospects of these countries. The Fund defines correspondent banking as the provision of banking services by one bank, which is the correspondent bank, to another bank, which is the respondent bank. It added that correspondent banking is an essential mechanism that enables customers and businesses to conduct payment transactions and send money across borders, as well as for banks to access foreign financial systems. Further, the IMF reiterated the need for coordinated efforts to address the challenges facing the SSA region, while stressing that building trust is a key factor to mitigate the risks associated with CBR withdrawal. It encouraged SSA authorities to strengthen communication channels with global banks, including by providing policy statements, and called on respondent banks to provide any requested information in a timely manner. It stressed the need for sustained technical assistance and training by relevant public and private institutions to improve anti-money laundering and the combating the financing of terrorism frameworks, as well as to strengthen respondent banks' capacity to manage any associated risks. Finally, the Fund noted the importance of developing regional responses, including better coordination among oversight entities, and the potential expansion of regional clearing and payment systems.
Source: International Monetary Fund