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De-risking – meeting the challenges


De-risking – meeting the challenges

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THE VIEW HAS BEEN EXPRESSED in some quarters that left unchecked, the process of de-risking may leave some countries with absolutely no access to international finance. That, in turn, is likely to exacerbate the conditions of poverty and exclusion that fuel the terrorism and crime these rules were designed to prevent.

The Prime Minister of Belize, Dean Barrow, raised the issue of correspondent banking with United States (US) President Barack Obama at the Summit of the Americas recently in Panama. It was also raised by Antigua and Barbuda Prime Minister Gaston Browne in his remarks at the meeting between CARICOM Heads and Obama in Jamaica immediately before the summit.

The Caribbean Association of Banks has come out in support of the view expressed by Browne that there is a very real and grave threat to the Caribbean banking industry. Browne said there had been an unfair and unsubstantiated labelling of the region as a high risk area for financial services by some US organisations. As a result, there is a threat of loss of correspondent banking relationships to banks in the region.

The issue of the international banks providing correspondent banking services turns on the risk ratings assigned by the international regulatory agencies which have put the Caribbean in a high-risk box.

Some regulators have made the point that though the Caribbean is a high-risk area, it has a very thin record when it comes to anti-money laundering prosecutions. Whether fair or not, they interpret this to mean we are doing little to eliminate obvious money laundering or that our systems are weak. The recent rumblings in the US that the area may be contributing terrorists to ISIS, whether substantiated or not, has not helped.

In the choppy waters of international banking, the big banks are the Leviathans and the Caribbean nations are bottom feeders. Indications are that governments, local regulatory agencies, banking operations, and related associations will need to come together on common approaches to leverage collective influence. International regulators respond best to proactive initiatives which demonstrate that a jurisdiction is doing all that it can to be transparent and to eliminate money laundering and financing of terrorism risks.

Recently in Britain, which is one of the world’s leading financial centres, the economic secretary to the Treasury, Andrea Leadsom, hosted a cross sector round-table discussion on how to address the growing problem of banks closing down and denying bank services to a range of customers. It involved representatives from the charity, remittances, financial technology and defence sectors, as well as the banking industry and regulations.

The British Banking Association is convening regulator meetings of round-table participants to monitor progress and is in continuing dialogue with members of the G20 group on the issue. It may be true that the possibility of de-risking driving transactions underground and disrupting international trade, could influence some reversal of the current trend. However, the Caribbean can’t wait and the issue begs for a united effort in leveraging whatever collective bargaining power these small nations have.

Louis Parris is a certified compliance professional, consultant and publisher of the Caribbean Banking Intelligence AML Compliance Newsletter. Email: [email protected] This concludes his four-part series on de-risking.