The challenges of derisking of correspondent banking services in Jamaica: Managers' perspective

Correspondent Banking is critical to the growth and development of Caribbean economies, without which these economies would experience a reduction in international trade, remittances, and investment flows. The loss of CBRs has had an adverse impact with negative implications for the personal and commercial activities of clients. Some of the implications include substantial increases in the cost of services, cut back on some services, and reduced access in some sectors. While there is empirical and anecdotal evidence to show the varying impact of derisking across the Caribbean, this study explores, from the managers’ perspective, how the challenges of derisking correspondent banking affect the management of MSOs in Jamaica. Based on the researcher’s interpretivist philosophical stance adopted for this research, a qualitative methodology was employed, utilising an inductive approach with a monomethod of semi-structured open-ended interviews to collect the data, followed by a thematic analysis of the data. Constructivism positions the researcher to collect participant generated data and examine the context based on multiple subjective perspectives. The researcher therefore interviews participants, studies the context or setting of the participants, interprets the data, and validates the credibility of the findings, to create a set of model guidelines. The findings suggest that in Jamaica, derisking is itself a risk; MSOs could lose their correspondent banking relationships because they are perceived as high risk in so far as money laundering, lottery scamming, and low profitability. The main challenge, therefore, is to remain compliant, which has proven to be onerous and costly in terms of finance and human resources. The financial sector, specifically MSOs, is perceived as overregulated, and some of these regulations can impede the government’s effort to increase financial inclusion. The key recommendation is the development of a framework that will utilise the piloted Jamaica National Identification System (NIDS), incorporating the uniqueness of the Jamaican system to facilitate onboarding and transaction monitoring.