The recent trend of banks canceling their correspondent banking arrangements with other banks for fear of taking on too much money laundering risk, amid ever increasing compliance costs, has hit the Caribbean and especially money service providers hardest.
The so-called de-risking has had an impact on trade and the ability to make cross-border transfers in many countries of the region, with few solutions in sight.
For Christopher Louard, director of Bank Supervision at the Eastern Caribbean Central Bank, one possible answer is the introduction of a regional digital payment system based on blockchain technology.
This concept would effectively lead to the digitalization of the countries’ Fiat currencies through the creation of a regional digital currency and a multilateral clearing system built on a distributed ledger or blockchain technology.
Speaking at the annual conference of the Caribbean Regional Compliance Association in Cayman last week, Mr. Louard quoted reports by the German central bank outlining the benefits of the new technology in terms of operational efficiency and financial inclusion.