25 February 2016
Volume 39, Number 08
CARICOM Heads of Government meeting in Belize have agreed to establish a high-level advocacy group to express internationally their concern that the economies of the region could be ruined if the issue of correspondent banking is not addressed at the highest levels.
The group will be led by the Prime Minister of Antigua, Gaston Browne, and will engage in discussions with a range of government and multilateral institutions including the United Nations and the World Trade Organization.
The goal is to underline to all the key players including the US Congress “how absolutely existential this issue is for us”, Belize’s Prime Minister, Dean Barrow, who is the current Chair of CARICOM, told the media. He said he would also be writing to the US President about the issue.
At a closing press conference, Prime Minister Barrow dealt at length with the issue of and conceded that there was no simple solution.
“It is going to take a great deal of doing… all we can say is that we are determined to pursue all possible means until we get the kind of resolution… that we want,” he told the media. In order to underscore the gravity of the situation, he told journalists that Montserrat, a CARICOM Member State, had only two banks and both were “having their status revoked”.
He said that banking regulators had assured government that there was no “problem with our jurisdictions” and added that all CARICOM Member States were Financial Action Task Force (FATF) compliant.
The threat relates to the possible loss of access to the international financial markets mainly by regional indigenous banks. Several international banks, mainly in the US and Europe, have signalled to client banks in the region an unwillingness to continue carrying their business. The so-called ‘de-risking’ by the global banks threatens to impact several critical services including remittance transfers, international trade, and the facilitation of credit card settlements for local clients.
Speaking about the issue on the side-lines of the summit, the Barbados Prime Minister, Freundel Stuart, said that if correspondent banking services were withdrawn, “that could spell destruction for many of our economies.”
The origin of the problem lies in relatively new international regulations intended to address money laundering and the financing of terrorism, known as AML/CFT.
These requires that all financial service providers, including the big banks and those working with low income communities, enhance their internal controls; undertake customer due diligence procedures on all new and existing clients; introduce higher levels of surveillance of suspicious transactions; keep transaction records; and report suspicious transactions to national authorities.
It also requires international banks and financial institutions to know that their correspondent bank, for example in Jamaica, the Dominican Republic or Guyana, is also undertaking the same level of due diligence and knows its customers.
This has had the unintended consequence of seeing increasing numbers of international banks withdrawing their correspondent banking facilities either on the basis of the cost of compliance with the AML/CFT rules, or the perceived possibility that they may be placing themselves in jeopardy with their own supervising financial body; with the possibility they may face huge fines.
Prime Minister Stuart said that there was “a resounding consensus that we need to do something about this issue or have something done about it, if our economies are not to be imperilled”.
The full CARICOM Heads of Government communique on the summit held in Placencia, Belize on February 16-17 can be found at the following link:
This is an extract from the Caribbean Council’s leading weekly editorially independent publication, Caribbean Insight, which provides in depth information on current economic, political and commercial developments in the Caribbean and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in the Caribbean find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region.
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