Financial Crime World

Correspondent Banks Hesitant to Do Business with Jamaica Due to “Grey List” Status

The Financial Action Task Force (FATF) has removed Jamaica from its “grey list”, a move that is expected to ease concerns among correspondent banks and international financial institutions. However, the country’s reputation remains tarnished, and many banks are likely to remain cautious in their dealings with Jamaican firms.

Background

In February 2019, FATF changed its metrics for measuring the size of financial assets, which led to Jamaica being reassessed under a stricter criteria. The country was subsequently added to the “grey list” due to its relatively weak compliance with international anti-money laundering and counter-terrorism financing (AML/CFT) recommendations.

Consequences

The addition to the “grey list” had significant consequences for Jamaican businesses, as correspondent banks began to apply additional protocols when evaluating risk, leading to:

  • Longer transaction times
  • Account closures
  • Some major companies, such as Clarks.com, stopped processing Jamaican cards
  • US brokerage firms refused to accept new clients from Jamaica

Government Response

In response, the Jamaican government implemented a series of reforms aimed at addressing the deficiencies identified by FATF. These included:

  • Amendments to the Companies Act
  • Regulation of the microcredit sector
  • Implementation of a risk-based approach to regulating the financial sector

Progress and Challenges

The efforts paid off, as Jamaica’s December 2023 follow-up report with the Caribbean Financial Action Task Force (CFATF) showed that the country had made significant progress in complying with FATF recommendations. However:

  • Correspondent banks are likely to remain hesitant to do business with Jamaican firms due to the risk of potential financial sanctions or loss of charter/license
  • Jamaica’s reputation remains fragile, and any further setbacks could lead to a re-evaluation of its status

Future Outlook

In a statement, the Jamaica Bankers Association welcomed the removal from the “grey list” but acknowledged that:

  • The industry must continue to work with stakeholders to ensure ongoing compliance with AML/CFT regulations
  • Financial institutions played a crucial role in achieving this milestone and will continue to do so to combat money laundering and terrorism financing

Ultimately, Jamaica’s ability to maintain its improved status and attract correspondent banks will depend on its continued commitment to implementing effective AML/CFT measures and demonstrating its willingness to cooperate with international partners.