US govt’s response to ‘de-risking’ in limbo under Trump administration

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The director general of the Organisation of Eastern Caribbean States (OECS) believes that “it is anyone’s guess” what stance the newly inaugurated administration of United States (US) President Donald Trump will take toward the de-risking faced by Caribbean banks.

Dr Didacus Jules said there were two broad polices of the Trump administration that could either cause further de-risking or could lessen the pressure on US banks to sever relations with regional institutions.

“One the one hand, the Trump administration will undoubtedly strengthen and tighten all measures necessary for the US’ national security. And part of the argument for US banks to de-risk has to do with anti-money laundering (AML) and counter-terrorism financing (CFT).

“But on the other hand, the profile of that same administration also suggests that is likely to veer toward the removal and minimisation of government regulations allowing more unfettered private sector operations,” Dr Jules said.

While on the campaign trail in 2016 President Trump promised to strengthen US border control and security. Meanwhile, minimising the regulation of the private sector has long been the philosophy of the now incumbent Republican Party.

“Which side they will come down on is anybody’s guess,” the director general said.

He was speaking at Thursday morning’s Breakfast Forum hosted by the Antigua & Barbuda Employers Federation (ABEF).

At the same forum Financial Secretary Whitfield Harris said that de-risking remains “a clear and immediate danger”. He argued that it is a result of the “unfair labelling of Caribbean jurisdictions as high risk”.

Financial Secretary Whitfield Harris (OBSERVER media photos)

Since 2015, the issue of Correspondent Banking Relations (CBR) has become a concern for regional governments as US and other banks cease the CBRs with indigenous banks – a practice quickly dubbed “de-risking”.

The term is derived from the fact that CBRs are often served because a correspondent bank outside the region does not want to risk the hefty fines that would be imposed on them if they did business with a regional bank that was not AML and CFT compliant.

A correspondent bank is a financial institution that provides services on behalf of another financial institution and are used by banks in one country to conduct business in a foreign country.

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