Coming out of the 37th Caricom Heads of Government Meeting held earlier this week in Guyana, regional Leaders have decided to lobby the United States Government to intervene and stop the country’s banks, which have been ending corresponding relations with indigenous banks in the Caribbean over money laundering concerns.
During the final leg of the Caricom caucus, Jamaican Prime Minister Andrew Holness updated the meeting on discussions over the two days. He noted that the issue of correspondent banking has affected all the countries in the Region.
In this regard, the Jamaican PM declared that the Conference has come to an agreement to lobby the US Government on the matter: “We have advanced on this matter in terms of agreeing that we should seek to lobby directly to the US Government.”
Additionally, the Jamaica Leader outlined that member States also resolved to increase their voices in various international forums, as well as to enlist the support of friendly countries on their behalf.
According to Holness, the issue has the potential of seeing the Caribbean being locked out from the international financial system if it is not addressed immediately. Nevertheless, the Prime Minister stated that steps are afoot to ensure that member States are compliant with the relevant Anti-Money Laundering (AML) laws in order to avoid de-risking.
“We feel that we are taking the necessary steps to comply – all countries are moving apace with compliance and internally, we have encouraged each other to, as quickly as possible, meet the compliance requirements,” he remarked.
However, the Jamaica PM noted that at the same time, it should be recognised that there are those countries that are in compliance and should therefore be rewarded for facing the threat of a correspondent bank pulling out its services.
Moreover, when asked, Holness opted not to provide a figure as to how many corresponding banks have cut ties with the Region but stressed that several banks have pulled out from various countries across the Caribbean.
The Jamaica Leader went on to highlight the issue is not only about the ending of correspondent banking relations but also the threat of it and the uncertainty it adds to financial transactions in the Region.
“Certainly, in Jamaica we know of at least one case where we have lost a correspondent bank and the burden it imposes, the uncertainty. But we are doing everything to move apace with compliance and Jamaica would be amongst those countries that have complied at this stage,” he remarked.
Caricom’s final decision to lobby the US Government comes on the heels of St Lucian Prime Minister Allen Chastanet cautioning that such a move would be fruitless; instead, they should seek help of US companies and individuals with ties to the region.
According to the St Lucian Prime Minister, the region must stop thinking that it has to solve this problem alone. He pointed out that there are a number of multinational companies in the US such as airlines, cruise industries, suppliers and individuals who own their homes – who have a vested interests in the region and who know exactly how to lobby their government.
“The idea of us going to Washington DC by ourselves is a tried and tested failure. We must be able to bring more people to the argument and we must do it urgently,” Chastanet stated in his presentation at the opening of the Heads of Government Conference on Monday.
Foreign Banks, particularly those in the US, have been withdrawing from their relationships with indigenous Caribbean banks because of fears of money laundering and questionable sources of funds, which would cause them to receive heavy fines from regulators.
However, the Caribbean banking institutions rely on such relationships in order to allow residents to conduct international financial transactions. Since last year the Region has been facing the impact of de-risking and the issue has been occupying the attention of Regional policy-makers, following signals by international banks that they are unwilling to continue carrying the business of regional banks.
This situation is called de-risking and poses dire consequences for the region including crushing impacts on the wider economy.
De-risking in the Caribbean came into the limelight last year when the Belize Bank was cut off by the Bank of America and one of the two banks in Montserrat experienced the same fate. In addition, the Governor of the Bank of Guyana, Dr Gobind Ganga, just recently confirmed that the Bank of America has also ended its correspondent banking relations with Guyana about a month ago.
However, Dr Ganga assured that there is no need to panic since Guyana is already in talks with other overseas banks that are interested in offering correspondent banking services to local financial institutions.
Some of the areas that affected because of de-risking are: transfers of remittances, cheque payments, international trade, and the facilitation of credit card settlements for local clients.
The Caribbean Development Bank quoted a November World Bank survey as saying that about 75 per cent of international banks have experienced a reduction in correspondent banking services, with the Caribbean being the worst affected.
