The government will provide financial support to Australian banks to help stamp out financial crime and help them remain in the Pacific Islands.
Australia’s government will provide $6.3 million (US$4.3 million) in Commonwealth funds to bolster banking infrastructure building in the Pacific amid ongoing competition with Beijing.
The move is set to be announced by Treasurer Jim Chalmers at Brisbane’s Pacific Banking Summit on July 9, where talks will focus on bank closures and shoring up financial stability in the region.
“Australian banks like Westpac and ANZ provide vital banking services to the region and have been in the Pacific for more than a century,” Mr. Chalmers will say on July 9.
“We know how critical these services are for local communities, which is why we have been actively talking to all the major Australian banks, to let them know how important a continued Australian banking presence in the region is to the government.”
The move is expected to help strengthen financial systems in the Pacific against crime and money laundering, and ensure Australian banks are a deep part of the Pacific fabric.
The departure of Australian banks to avoid being entangled in money laundering schemes could, however, leave the Pacific Island countries open to Chinese financial institutions.
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Last April, Nauru, which uses Australian dollars as its currency, signed a memorandum of understanding with the state-owned Bank of China, after Bendigo and Adelaide Bank announced it was pulling out by December this year.
Meanwhile, the extra funding will go toward developing digital identity infrastructure in the Pacific, and enhancing compliance with anti-money laundering and counter-terrorism financing requirements.
Mr. Chalmers will update economic ministers on progress to reverse the decline in banking services when he attends the Pacific Islands Forum Economic Ministers meeting in Suva, Fiji, later in the year.
The Pacific Banking Forum, which runs over two days, was a key outcome of the meeting between U.S. President Joe Biden and Prime Minister Anthony Albanese last year.
Co-hosted by Canberra and Washington, 300 people—Pacific leaders as well as representatives from commercial banks and international organisations, such as the International Monetary Fund—will take part in the event.
The discussion will focus on the decline of “correspondent banking relationships” in the region.
A correspondent banking relationship involves financial institutions providing services on behalf of another bank, typically in a foreign country.
