Money Markets
Restrictions largely driven by commercial decisions as well as
legitimate concerns about money laundering and terrorism financing risks
have left customers turning to unregulated financial institutions.
PHOTO | FILE
By IMMACULATE KARAMBU, ikarambu@ke.nationmedia.com
In Summary
- The surveys indicate that business lines such as clearing of cheques and trade finance are affected by the move, according to a statement from the bank.
- Termination or contraction of these services can result into financial exclusion and negatively impact of countries that depend on foreign remittance inflows to boost their growth.
- According to the World Bank, these restrictions are largely driven by commercial decisions as well as legitimate concerns about money laundering and terrorism financing risks.
Two surveys carried out by the World Bank between
April and October 2015 show that unnamed large global banks are
restricting or terminating their relationships with other financial
institutions putting at risk money transfer services.
The surveys indicate that business lines such as clearing of
cheques and trade finance are also affected by the move, according to a
statement from the bank.
According to the World Bank, these restrictions are
largely driven by commercial decisions as well as legitimate concerns
about money laundering and terrorism financing risks, leaving customers
to turn to unregulated financial institutions.
“Now that we have evidence that large banks are
reducing services to correspondent banks and remittance providers, the
private and public sectors need to come together to find practical and
fact-based solutions.
“There is a real risk that turning away customers
could actually reduce transparency in the system by forcing transactions
through unregulated channels,” said Gloria Grandolini, senior director
of finance and markets global practice at the World Bank Group.
Correspondent banking relationships aid companies and individuals to do business and make payments internationally.
Termination or contraction of these services can
result into financial exclusion and negatively impact of countries that
depend on foreign remittance inflows to boost their growth.
“Making banking services accessible, transparent
and affordable is essential to achieving the goals of promoting
financial integrity and universal financial access by 2020, which means
that basic legitimate access to the formal financial system should be
possible for everyone,” said Ms Grandolini.
Data from the Central Bank of Kenya shows that the
amount of money sent home by Kenyans living abroad decreased to Sh13.09
billion in September from Sh13.47 billion in August due to lower
remittances from North America
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