Policy News

BAFT Releases Respondent’s Playbook

A guidance paper for users of correspondent banking services

WASHINGTON — BAFT, the leading global trade association for transaction banking, today released the Respondent’s Playbook for Obtaining and Maintaining a Correspondent Banking Relationship, a guidance document for users of correspondent banking services. The Playbook outlines the decision making process of correspondents establishing new and reviewing existing relationships and the measures that respondents may take to increase the likelihood of a favorable outcome.

The Playbook is part of BAFT’s effort to address the significant decline of correspondent banking relationships worldwide since 2011. “The playbook is a realistic window into actively managing de-risking,” said Tod Burwell, president and CEO of BAFT. “It discusses the three major divers in a correspondent’s decision process when considering a new or reviewing an existing relationship, and empowers a respondent to improve its circumstances by adopting certain best practices.”

To develop the playbook, BAFT convened a core working group of global correspondent banks and one industry body representing the largest global correspondent banks. Business as well as compliance representatives participated in the project to ensure a comprehensive and balanced perspective.

“BAFT designed the playbook to help respondents – including banks, money services businesses, and fintech companies – better understand the legitimate expectations of correspondents,” remarked Samantha Pelosi, SVP, Payments & Innovation of BAFT and the primary author of the playbook. “BAFT vetted the best practices with a group of respondent banks to confirm their reasonableness and feasibility. The playbook also contains answers to questions frequently asked by respondents.”

BAFT plans to offer two-day instructor-led courses in jurisdictions most impacted by the decline in correspondent banking relationships. The training will explore the content of the playbook, placing special emphasis on the best practices through the provision of additional detail, evaluation of recommended procedural, technological, and policy solutions, and the presentation of case studies. Contact BAFT’s Project Management Office to request training for your organization and/or its members.

The Respondents Playbook is free of charge for BAFT members and available for purchase for non-members. Playbook may be found here.

After completing the check-out for this product, please proceed to My Downloads located in the top right corner or your scree to access the PDF.

EU List of AML-Deficient Jurisdictions Includes U.S. Territories

The European Commission today issued its own list of 23 jurisdictions today that it said have “strategic deficiencies” in their anti-money laundering and counter-terrorist financing frameworks.

The European Commission today issued its own list of 23 jurisdictions today that it said have “strategic deficiencies” in their anti-money laundering and counter-terrorist financing frameworks. The list — developed separately from the list of 12 countries maintained by the international Financial Action Task Force, which is the globally recognized body for assessing AML/CFT standards — includes four U.S. territories: American Samoa, Guam, Puerto Rico and the U.S. Virgin Islands.

The Treasury Department immediately expressed its strong concern about the inclusion of U.S. territories on the list. “The commitments and actions of the United States in implementing the FATF standards extend to all U.S. territories,” the department said. “The same AML/CFT legal framework that applies to the continental United States also generally applies to U.S. territories.” Treasury emphasized that the European Commission’s process for identifying these jurisdictions was far less robust than FATF’s methodology.

The commission said its list was developed under stricter EU criteria that took effect last summer. While Treasury said that it “does not expect U.S financial institutions to take the European Commission’s list into account in their AML/CFT policies and procedures,” ABA is concerned that the EU list may pose difficulty for EU-based banks or U.S.-based banks with EU operations that operate in or have correspondent relationships with banks in the listed territories. The association will monitor the issue closely.

View the EU list.
Read the Treasury statement.
For more information, contact Samantha Pelosi.

IIFM and BAFT Publish MPA’s for Islamic Trade Finance

IIFM and BAFT announced the release of their joint initiative of creating global master participation agreements to support the development of Islamic trade finance business.

IIFM and BAFT Publish MPA’s for Islamic Trade Finance

WASHINGTON — IIFM (International Islamic Financial Market) and BAFT (Bankers Association for Finance & Trade), announced the release of their joint initiative of creating global master participation agreements to support the development of Islamic trade finance business.

The IIFM-BAFT Master Participation Agreements (IIFM-BAFT MPA’s) consist of two separate standardized framework documentation to cater for Shari’ah-compliant Unfunded and Funded participation arrangements for trade finance transactions. The master agreements are supplemented by a Structure Memorandum and an Operational Guidance Memorandum to provide better understanding on use of the documentation from Shari’ah, legal and operational aspects. In addition, there are separate Shari‘ah pronouncement for each MPA standard.

“Trade finance plays an important role in the global financial system, and for Islamic finance it presents a huge opportunity which the market participants must avail,” said Khalid Hamad, chairman of IIFM. “The IIFM-BAFT Master Participation Agreements, like previous IIFM standards, will provide greater transparency, cost and time efficiency, legal certainty as well as Shari’ah harmonization which in turn will contribute in creating more active Islamic trade finance business.”

“Islamic trade has become an important transaction stream in many markets,” said Tod Burwell, president and CEO of BAFT. “By standardizing the framework for Shari’ah-compliant participation arrangements relating to trade, we hope that transaction execution will become easier and trade will continue to facilitate economic growth in these markets.”

“The IIFM-BAFT MPAs are developed based on a comprehensive industry consultation process under the guidance of the IIFM Shari’ah Board,” said Ijlal Ahmed Alvi, CEO of IIFM. “The MPAs provide the market participants with a robust and ready-to-use documentation. This is yet another major accomplishment for the Islamic finance industry, and going forward IIFM will aim to tackle other pressing issues relating to trade finance including Islamic trade finance products as part of the MPA’s development.”

IIFM and BAFT acknowledge the support of The Waqf Fund (Bahrain) for providing financial assistance grant in the development of these important standard documentations which is helping in the sustainable development of Islamic finance industry.

The templates may be found here

About IIFM
IIFM is established under Royal Decree (23) Year 2002 of the Kingdom of Bahrain as a neutral and non-profit standard setting organization that has been mandated to develop Shari’ah-compliant financial documentation and product confirmation Standards for the Islamic Financial Services Industry. IIFM’s other services include organizing specialized industry awareness seminars, technical workshops and industry consultative meetings as well as publishing research papers and an annual Global Sukuk Report. The organization’s website is www.iifm.net

About BAFT
BAFT, the leading global financial services association for international transaction banking, helps bridge solutions across financial institutions, service providers and the regulatory community that promote sound financial practices enabling innovation, efficiency, and commercial growth. BAFT engages on a wide range of topics affecting transaction banking, including trade finance, payments, and compliance. The association website is www.baft.org.

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