The Caribbean is facing a crisis imposed on it by other countries, and which has the potential to inflict the most devastating blow, according to former Prime Minister Owen Arthur.
Speaking yesterday on The Crisis in Correspondent Banking and its Impact on Sustainable Economic Development in the Caribbean at the SUNY UWI Centre for Leadership and Sustainable Development in New York, Arthur said any development that would delink the Caribbean from external financial markets was a burden that the region simply could not afford to bear at this juncture in its development.
“This however, is precisely the condition that the derisking crisis is threatening to impose on the region. It is for this reason that the correspondent banking crisis looms as potentially the most devastating threat to growth and development in the region. Secondly, there is a very considerable and negative human dimension that is at the heart of the correspondent banking crisis,” the former prime minister said.
According to the Financial Action Task Force, derisking is the termination or restriction of business relations to avert risk related to money laundering and terrorist financing.
The termination or restriction is usually to a correspondent bank, which is a financial institution that provides services on behalf of another financial institution.
Arthur pointed out that billions of dollars in remittances to the region, which have helped in its development over the years, could be eroded, insisting the “attack” on non-bank money transfer operators was misplaced.
Acknowledging that the correspondent banking issue was meant to help reduce financial crime, fight terrorism and strengthen financial systems, Arthur said, “the Caribbean cannot profess nor wish to stand askance from this global initiative”, adding it was in the Caribbean’s best interest that the fight against money laundering and the financing of terrorism was won.
However, he said it was “also in the Caribbean’s best interest that the rules and standards which have been set to govern the behaviour of financial institutions” were applied fairly and uniformly.
“As such, the core of the crisis, as it concerns the Caribbean, is that the rules that have been set are not being followed, and that the Caribbean has been more adversely affected by the breaches than any other group of countries,” he said.
He argued that derisking amounted to a “wholesale cutting loose” of clients and various types of businesses without evaluating the risk they posed, adding that was where the global financial community was increasingly headed.
He argued that the timing could not have been worse for the Caribbean, at a time when it needed “to master its cross border economic and financial relationships”.
“It has suffered grievously in the past from the failure to do so. The correspondent banking crisis will now add a new powerful adverse dimension as the region seeks to make the transition to a sustainable development macro-economic path,” he said, adding that Caribbean economies had often been stymied by “the inheritance and persistence of the effects of adverse forces on its cross border relations”.