Financial Crime World

Bank of Jamaica’s COVID-19 Response: Regulatory Ambit, Enhanced Monitoring, and Support for Financial Institutions

Introduction

The Bank of Jamaica (BOJ) has been at the forefront of responding to the challenges posed by the COVID-19 pandemic. To address these challenges, BOJ established a COVID-19 Threat Response Task Force to monitor the banking sector and credit unions.

Regulatory Ambit Expanded

  • Once cooperative societies that operate as credit unions are brought fully within BOJ’s regulatory ambit, the Bank will be able to exercise greater oversight and ensure compliance with Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations.
  • This move is expected to enhance the stability of the financial system and protect Jamaican consumers.

Enhanced Monitoring

  • The COVID-19 pandemic has presented significant challenges for the banking sector, leading to a scaling down of operations and immobilization measures.
  • In response, BOJ’s Examinations Departments have:
    • Heightened off-site monitoring of vulnerable institutions
    • Increased communication with Deposit-taking Institutions (DTIs) regarding output of stress tests
    • Provided frequent liaison with financial holding companies regarding the attendant impact on DTI groups

Support for Financial Institutions

  • To mitigate the impact of COVID-19 on the financial sector, BOJ implemented several measures to assist in maintaining financial market stability.
  • These included:
    • Guidance on the prudential treatment of payment accommodations
    • IFRS 9 accounting considerations
    • The prudential definition and identification of forborne exposures

Temporary Payment Accommodations and Provisioning Guidelines

  • In response to the uncertainty surrounding economic consequences, BOJ implemented multiple ad hoc supervisory initiatives aimed at strengthening DTIs’ and Financial Holding Company (FHC) designates’ ability to operate in a COVID-19 environment.
  • The measures provided temporary relief for DTIs and FHC designates in preparing their prudential returns, particularly in relation to:
    • Treatment of payment accommodations
    • Audited financial statements
    • Provisioning for expected credit losses

Money Laundering Thematic Assessment

  • In 2020, BOJ conducted a thematic assessment of wire transfers, identifying potential sources of money laundering (ML) risk exposures in the Jamaican financial system.
  • The study used network analyses of recent trends and patterns to develop possible strategies to mitigate ML risks.
  • The findings of this thematic exercise were shared with stakeholders in December 2020, informing recommendations for mitigating policy actions.

Conclusion

The Bank of Jamaica’s COVID-19 response has been characterized by a focus on enhanced monitoring, support for financial institutions, and measures to maintain financial market stability. As the country continues to navigate the challenges posed by the pandemic, BOJ remains committed to ensuring the stability and resilience of the Jamaican financial system.