How Much Anti-Money Laundering Effort is Enough? The Jamaican Experience
Schmid, Juan Pedro
The worldwide fight against money laundering (AML) is escalating. Individuals and businesses that conduct and depend on legitimate international financial transactions are feeling the impact of measures meant to counter illegitimate ones. Countries flagged as having weak AML regulations encounter substantial challenges maintaining correspondent banking relations. However, recent experiences have shown that fulfilling the AML standards, albeit necessary, is not sufficient to persuade financial institutions to keep international financial relations. This is particularly the case with international fund transfers via correspondent banks. Jurisdictions such as Jamaica--even if generally complying with AML standards--face challenges to use banks for correspondent services. Reasons to avoid having correspondent banking relations with certain financial institutions include the following: First, correspondent banking is risky in itself, given the difficulty for the respondent to effectively supervise the AML capacity of the correspondent. In addition, the risk of a transaction depends on country-specific factors, most notably the strength and enforcement of a sound AML system and the type of clients. Money services businesses constitute one category that is perceived as more vulnerable to money laundering. Given these elements, respondent banks may simply decide to sever correspondent banking relations to avoid risks--real or perceived--altogether. This tendency to avoid perceived risks makes finding a potential solution challenging. Not only would countries have to attain the highest possible level of compliance with AML standards, they would also need to develop a communication strategy that effectively conveys that the government and private sector recognize and embrace the money laundering issue and are committed to the implementation of AML efforts.