The modern focus on terrorism has galvanized efforts to stop the global financial system being used to launder money and fund terrorist activity. This effort is crucial and should continue. But the crackdown has had unintended negative consequences in developing countries. Tighter requirements introduced since the September 11 attacks, to verify who is receiving money and for what purpose, have strained relationships between financial institutions. In a worst-case scenario, this trend threatens to cut some countries off from the global financial system.

These otherwise well-intentioned regulations have made it more expensive and riskier for financial institutions outside the Pacific to maintain relationships within the region, particularly with lesser-known entities such as money transfer operators (MTOs) and small banks. Many of these relationships have been lost. This hurts Pacific nations in multiple ways. — blog.adb.org/blogs