Financial Crime World

Trinidad and Tobago: Strengthening Financial Sector Oversight

The International Monetary Fund (IMF) has issued a report urging Trinidad and Tobago to strengthen its financial sector oversight in the wake of the COVID-19 pandemic. The country’s economic growth projections were significantly revised downward due to the pandemic, highlighting the need for robust financial sector supervision.

Revised SIFI List and Supervisory Powers

Strengthening Oversight

The IMF recommends that the authorities revise the list of Systemically Important Financial Institutions (SIFIs) using best practice methodology and assign commensurate supervisory powers. This will ensure that these institutions are subject to rigorous oversight to mitigate potential risks to financial stability.

AML/CT Framework Strengthening

Enhancing Anti-Money Laundering Measures

Trinidad and Tobago must continue to strengthen its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) framework to address remaining Financial Action Task Force (FATF) recommendations. This will help prevent illicit financial flows and maintain international cooperation in combating money laundering and terrorist financing.

Financial Sector Data Strengthening

Improving Data Collection and Analysis

The IMF recommends that the authorities strengthen financial sector data collection, analysis, and dissemination to inform policy decisions and improve supervision. This includes assigning macroprudential powers to the Central Bank of Trinidad and Tobago (CBTT) to ensure effective monitoring of systemic risks.

Resolution Regime Amendments

Aligning Resolution Regime with Best Practice

The report calls for amendments to legislation to align the resolution regime with best international practice. A resolution unit should be established at the CBTT, and resolution planning should commence immediately.

Credit Union Supervision

Strengthening Regulation and Reporting

The IMF highlights the need for stronger supervision of credit unions, which lack an adequate regulatory framework and reporting system. This will help address potential vulnerabilities in the sector and ensure its stability.

Regional Interconnectedness and Sovereign Exposures

Managing Regional Shocks and Sovereign Risks

Trinidad and Tobago’s economy is highly dependent on the energy sector and closely integrated within the region, making it vulnerable to regional shocks. The public sector’s significant exposure to domestic financial institutions also poses risks to financial stability.

Conclusion

The IMF report underscores the importance of strengthening Trinidad and Tobago’s financial sector oversight to mitigate potential risks to financial stability. By revising the SIFI list, enhancing AML/CFT framework, improving financial sector data, and addressing credit union supervision, the authorities can help ensure a more robust and resilient financial system.

Recommendations

Implementing Strengthened Oversight

  1. Revise the SIFI list using best practice methodology.
  2. Assign commensurate supervisory powers to SIFIs.
  3. Strengthen AML/CFT framework to address remaining FATF recommendations.
  4. Enhance financial sector data collection, analysis, and dissemination.
  5. Establish a resolution unit at the CBTT and commence resolution planning.
  6. Improve credit union supervision through stronger regulation and reporting.

By implementing these recommendations, Trinidad and Tobago can strengthen its financial sector oversight and reduce potential risks to financial stability.