Pacific countries have been urged to strengthen risk-based financial supervision to protect access to global banking systems, improve financial inclusion and combat financial crime across the region.
Opening the Pacific Risk Based Supervision Workshop in Nadi Tuesday, Acting Director of Programmes and Initiatives at the Pacific Islands Forum Secretariat, Denton Rarawa, said Pacific nations face growing pressure from financial crime risks, limited supervisory resources and dependence on international financial flows.
“Your presence here reflects a shared recognition that effective supervision, grounded in sound risk assessment and proportional responses, is not simply a technical requirement. It is a cornerstone of economic stability, social trust, and sustainable development across our region.”
The three-day workshop has brought together central bank governors, supervisors, financial regulators and international partners to strengthen anti-money laundering and counter financing of terrorism systems across the Pacific.
Rarawa said Pacific Island countries may differ in size and economic structure, but they face common challenges including small open economies, vulnerability to external shocks and reliance on cross-border financial services.
He said risk-based supervision allows regulators to focus resources on the areas posing the greatest threat to financial integrity instead of relying on rigid rule-based systems.
“The effectiveness of an AML/CFT system therefore depends not on how many rules exist, but on how intelligently effort is directed to where the risks are greatest,” he said.
Rarawa warned that weak or unpredictable regulatory systems could lead to de-risking, higher transaction costs and loss of correspondent banking relationships.
“Correspondent banking relationships (CBR), cross-border payment channels, and international investment flows all depend on confidence in the quality and credibility of domestic regulatory regimes,” he said.
“By contrast, a well-articulated and consistently applied risk-based supervisory approach signals maturity, competence, and seriousness of purpose.”
He also said risk-based supervision could improve financial inclusion by preventing low-risk customers and remote communities from being shut out of the banking system through overly strict compliance measures.
“A risk-based approach allows supervisors and institutions to distinguish between higher and lower-risk activities, enabling simplified and proportionate measures where appropriate,” Rarawa said.
“This creates space for safe financial inclusion, expands access to payments and savings, and strengthens the link between financial integrity and development objectives.”
Rarawa acknowledged that implementing effective supervision systems remained challenging for small Pacific states due to limited resources, staffing and technical capacity.
However, he said progress was possible through regional cooperation, peer learning and technical assistance.
“The Pacific has long demonstrated resilience, adaptability, and a strong commitment to collective solutions,” he said.
“By continuing to strengthen risk-based supervision within our AML/CFT frameworks, we not only protect our financial systems from criminals and abuse, but also promote trust, inclusion, and sustainable engagement with the global economy.”.
Rarawa also thanked the World Bank and the Reserve Bank of Fiji for supporting the workshop.
