Editorial: The de-risking trees in the remittance forest

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Saturdays are quickly becoming a day for reflection.  A day where we try to get out of the political muck and take a look at the bigger picture.  We invite you all to do the same because it is amazing how much more you see and learn when you peek over the hedge.  There is a famous expression that says, “You can’t see the forest for the trees,” and it is often appropriate in our little world of tribal politics. People often get so caught up in the details that they miss the big picture. Many are guilty of it, which is why it is so important to pause and look beyond the trees that blind our vision.
The topic of today is remittances.  Not exactly a light topic, but since it is the International Day of Family Remittances (IDFR), we thought that it was an excellent topic to discuss, especially in light of the entire de-risking issue that is hanging over our head like the Sword of Damocles.  The United Nations celebrates IDFR every year on June 16. The day is “aimed at recognising the significant financial contribution that migrant workers make to the well-being of their families back home and to the sustainable development of their countries of origin. It is also aimed at encouraging the public and private sectors, as well as the civil society, to do more together and collaborate to maximise the impact of these funds in the developing world.”
That is a nice sentiment, but when we look at the situation in totality, much of the benefits of remittances could be jeopardised by de-risking.  Just in case you do not know what de-risking is, and its possible impact on the Caribbean, we invite you to google it, but we will give you a short primer.  In a nutshell, Caribbean banks rely on correspondent banks to connect them to the financial world. When money is transferred to or from a Caribbean bank, it passes through various correspondent banks before reaching its destination.  Since the global financial crisis of 2008, correspondent banks no longer deem the risk of doing business with Caribbean banks as financially appealing. The risk of penalties for breaching laws and regulations could possibly exceed the ‘profits’ generated by the banks in the region.  This leads to the term “de-risking” and it is a serious issue that affects the developing regions of the world disproportionately.
Not too long ago, Prime Minister Gaston Browne authored a report entitled “Ending De-Risking in the Caribbean: Eliminating Risks for the World” which is worth a read.  (You can find a link for the document at antiguaobserver.com.) The PM did a good job of addressing the issue and presented “Ten Practical Ideas for International Co-operation to Maintain the Caribbean’s Inclusion in the Global Financial and Trading System.
If you send or receive money via the banking system, then you owe it to yourself to read the PM’s report.
To get an idea of how critical remittances are to the developing world, we need only look at the big picture statistics put out by the World Bank.  Around the world, remittances to developing countries amount to over US $425 billion. When we look closer to home, Latin America and the Caribbean come in at approximately $73 billion.  The region was the only one to see growth in remittances in 2016. Sure, the big nations account for the majority of those billions, but Antigua and Barbuda actively participates in the remittance activity of the region.
Residents are recipients of money transfers from the diaspora, and locals send money to support their families across the region and the world.
We have not been able to find good statistics on the flow of remittances to and from Antigua, but we can look at our neighbours to see what type of impact remittances have on developing nations in the region.  Jamaica is a good example. In 2017, remittance inflows stood at over US $2.25 billion and accounted for 16.7 percent of the country’s gross domestic product (GDP). That is a whopping amount and you can only imagine the impact that de-risking would have on that nation should money transfers become harder to execute.  So who does this affect? It certainly does not target the suspected criminals who are pushing us towards de-risking. In a 2010 study done by the Bank of Jamaica, the statistics indicated that 75 percent of remittance recipients were female and 60 percent were classified as single. Six percent were classified as “Other” which comprised divorcees, widows, etc.   
The problem is, the banks and foreign governments put no human face to the issue.   It is all about the bottom line and policy. There is no consideration that to stop the minority, there is a need to sacrifice the majority.  There seems to be little thought given to the repercussions of de-risking decisions and the new risks of societal changes for the worse. The actions may end up creating more criminal activity than they seek to prevent.  So, as we look beyond the trees, on this International Day of Family Remittances, we hope that someone is listening to the PM when he says, “Representatives of Governments of the OECD countries must cast aside the policy briefs seen through an AML/CTF lens only. They have to see the problem of de-risking more broadly and realistically.”
Referenced document here.

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