#BTEditorial – Derisking, cutting us off at the knees

The Caribbean has made one of its strongest cases yet to a global superpower over the vexing issue of derisking and  the quickly disappearing access to correspondent banking services. The situation poses a grave threat to our small and vulnerable economies.

In a historic presentation to the United States House Committee on Financial Services led by chairwoman Maxine Waters, the regional representatives convincingly argued their case and succeeded in putting a human face to what has become a burgeoning crisis.

Prime Minister Mia Mottley is fittingly being praised for giving leadership to the issue and for using the global leverage she has acquired over the past  four years, to force the American political actors to take a second look at the consequences of this over-regulation of the region’s financial sector.

Under the theme When Banks Leave: The Impacts of De-Risking on the Caribbean and Strategies for Ensuring Financial Access, Mottley led a formidable team of expert witnesses including Ms. Wendy Delmar, CEO of the Caribbean Association of Banks; Mr. Wazim Mohamed Mowla, Assistant Director and Lead of the Caribbean Initiative; Mr. Wayne Shah, Senior Vice President, Financial Institutions – Head of Caribbean Region, Wells Fargo Bank; Mr. Amit Sharma, CEO and founder of FinClusive; and Ms. Liat Shetret, Director of Global Policy and Regulation, Elliptic.

With Prime Minister of Trinidad and Tobago Dr Keith Rowley also present to support her and provide back-up as Mottley responded to some questions from members of congress, her presentation was on-point.

Mottley displayed the confidence of a leader who knew the topic and its sub-text  well. She even managed to bring a bit on levity in some of her responses to lighten the air in the Congressional Hearing Room.

Correspondent banking refers to banking services provided by another financial institution in another country  facilitating wire transfers, conducting business transactions, accepting deposits and other services.

The absence of such services would mean that even simple transactions on our VISA or Master cards would be interrupted.

Just imagine the havoc such a development would cause in Barbados where locals and visitors perform the bulk of their transactions on these platforms.

Derisking occurs when those correspondent banks decide, it is either too risky, and or, too costly to continue such a relationship with Caribbean financial institutions.

The US second largest bank – Bank of America, in 2015, cut off correspondent banking operation with domestic and international branches of Belize Bank.  Back then, a US State Department report identified 60 countries including several in the Caribbean as “countries of primary concern” for money laundering and financial crimes, leading Bank of America to take the derisking action.

Mottley made a nonsense of that subtext of these arguments which still prevail today, citing the fact that these State Department reports were often crafted by “low level” functionaries, who often acted on dated information. She also slammed the lack of opportunity for countries to respond to the reports in real time.

However, her most noteworthy indictment occurred when she dared to tell the US congressional representatives to the faces that the real problem with money laundering was not in the Caribbean.

She told them boldly that the real money laundering was taking place in the metropoles of London, Luxembourg, and American financial centres. However, these countries are never cited on adverse lists that threaten their economies and their ability to trade and do business.

It is simply not fair that Caribbean nations are suffering significant reputational risk based on pejorative stigmas used in reports such as “tax havens” “money launderers” despite the ropes, and hoops they forced to manoeuver only to have the standards changed when they finally meet them.

The region made an effective case for there to be balance in the effort to stamp our financial crimes and allowing countries in the region the required space to effectively run their economies and trade with the rest of the world.

As a rule, we do not use this editorial space to promote any agenda, but  simply to represent the Four Estate’s responsibility to speak truth to power.

However, on this occasion, we encourage our readers to follow the link below and review the Congressional Hearing for yourself. When Banks Leave: The Impacts of De-Risking on the Caribbean and Strategies for Ensuring Financial Access | U.S. House Committee on Financial Services

These issues are often sidelined by the average citizen as being too weighty and esoteric for them. We say no. This represents life or death for us in the Caribbean.