LONDON (Reuters) - Governments and lenders must do more to stop a decline in banks handling international money transfers, which are vital to some families in developing countries but have been hit by stricter compliance checks, a global finance watchdog said on Wednesday.
Regulators have long been concerned that tighter rules against financial crime such as money laundering and bribery are having the unintended consequence of clogging up the cross-border flow of money.
The Financial Stability Board is concerned this could harm households in developing countries that rely on remittances and potentially drive some payments underground.
The number of lenders handling overseas money transfers fell again last year by 3.4%, the watchdog said, taking the cumulative decline since 2011 to nearly a fifth.
The FSB, which coordinates financial rules across the Group of 20 economies (G20), has been rolling out measures aimed at halting the decline, such as more streamlined customer checks, and clarifying to banks what regulators expect of them.
The watchdog said that while the decline in so-called correspondent banking slowed last year, all parties involved in international money transfers needed to step up.
"Dialogue... has been useful, but has not led to tangible next steps," the FSB said.
Correspondent banking refers to banks relying on counterparts in other countries to carry out checks on customers transferring money, such as remittances.
The FSB reiterated that it is prepared to take further, unspecified, action should the decline in correspondent banking continue.
The watchdog will present its report to G20 finance ministers and central bank governors at their meeting in Fukuoka in Japan on 8-9 June.
(Reporting by Iain Withers; Editing by Jan Harvey)
