Prime Minister Gaston Browne recently released a 24-page report on the topic of de-risking, entitled “Ending De-Risking in the Caribbean. Eliminating Risks for the World.” In it, he highlights, “Ten Practical Ideas for International Co-operation to Maintain the Caribbean’s Inclusion in the Global Financial and Trading System,” and it is worth a read.
De-risking is a topic that the PM has demonstrated he has a good grasp of the details. We recommend that you read the report because it packs a lot of punch in its short length, and for that, PM Browne should be commended. Of course, not everyone will agree with what the PM has to say on the matter or the solutions that he proposes but we have to tip our hats to him for at least putting ink to paper to enunciate the problem, analyse it, and put forth what he believes are steps to move forward on the matter in a win-win situation.
It will be impossible for us to provide a comprehensive review of the PM’s paper (which is why we suggest you read it) but we will highlight some of the salient points made. As the report’s preface makes clear, the consequences and injustices related to the withdrawal of correspondent banking relations (CBRs) from banks in the entire Caribbean region by global banks in the United States of America and the United Kingdom is a serious matter, and “if it continues unabated, runs the risk of excluding the entire Caribbean from the world’s trading and financial system, plunging the region into economic decline, and creating an underground organisation for financial flows that are illicit and outside of regulatory control.” If this sounds dire to you, know that it is. To further borrow the words of the author, de-risking hangs over our heads like “the sword of Damocles.”
The PM walks the reader through the history and consequences of de-risking and does a good job of balancing the importance of CBRs to the region. We would love to delve into the details but space does not permit. We did particularly like the section entitled “The Fallacy of the Caribbean as a High-Risk Region” where the PM put the situation in perspective. In addressing the stigma associated with Caribbean money transfers, PM Browne makes the point that “it is in these very developed countries from which de-risking is being pursued, that 95 percent of global illicit flows take place.” This goes beyond the simple hypocritical message of the pot calling the kettle black.
Now to the meat of the matter; the 10 ideas on the way forward. Out of the many, there is one that caught our eye and it is when the PM got specific in his proposal that, “De-risking should be restricted to rogue, uncooperative institutions and countries, and not jurisdictions that cooperate with the OECD Global Forum and the FATF.” He continues on that point by saying, “Entire regions should not be broad-brushed as being ‘highrisk’. Jurisdictions should be assessed according to their own merits.” We couldn’t agree more and we thought that was one of the PM’s strongest points. If there is evidence of continued abuse then few will defend the consequences suffered by a rogue institution or nation.
This, in a way, gets back to the PM’s previous point regarding which nations participate in the most corrupt banking practices. It is the big developed countries. But they cannot de-risk themselves so they resort to managing the situation with policies like Know Your Customer (KYC) and Know Your Customer’s Customer (KYCC) but we here in the Caribbean and others in the developing world are not being offered the same opportunities that they afford themselves. Instead, we are threatened with de-risking. It is akin to using a blowtorch to kill a mosquito. The remedy is excessive and the consequences of its implementation severely outweigh the nuisance that caused the deployment of the ‘remedy’. It is a bit of a scorched earth approach.
Although we have highlighted only one of the PM’s ideas, the rest are worth consideration whether you agree with them or not. In fact, the entire document is worth your time, especially if you know little about correspondent banking and the implications of de-risking. And to make it easy, we are including a link to the document on our website antiguaobserver.com. It is only 24 pages … take some time to educate yourself on this very important topic.
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