THE United States State Department says most correspondent banking relationships in the country are in jeopardy owing to international banks wanting to de-risk.
Owing to the highly volatile Zimbabwe dollar that continues to depreciate, international banks have either moved out of the country or are reducing branch networks in the country. Two banking groups to announce their exit from the local market in recent memory are the British headquartered banking groups, Barclays Plc and Standard Chartered plc.
Resultantly, correspondent banks, namely, foreign financial institutions that provide services to local ones are now looking at the market with more risk attached.
According to the Basel AML Index, an independent global country ranking and risk assessment tool for money-laundering and terrorist financing, Zimbabwe has a score of 6,79 signalling more risk.
“Three major international commercial banks and several regional and domestic banks operate in Zimbabwe, but they have reduced their branch network substantially in line with declining business opportunities,” part of the United States State Department’s recent 2022 Investment Climate Report read.
“The central bank (Reserve Bank of Zimbabwe (RBZ)) maintains the banking sector is generally stable despite a harsh operating environment characterised by high credit risk, high inflation, and foreign exchange constraints.”
It continued: “Most Zimbabwean correspondent banking relationships are in jeopardy or have already been severed due to international bank’s efforts to reduce risk (de-risking) connected to the high penalties for non-compliance with prudential anti-money-laundering/counter-terrorism finance (AML/CFT) guidelines in developed countries.”
The report, however, noted that in March 2022, the Financial Action Task Force (FATF) removed Zimbabwe from the “gray list” in response to “significant progress in improving its AML/CFT regime”.
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Owing to the removal, Zimbabwe is no longer subject to the FATF’s