CaribZone Commentary: Aubrey Campbell –Monday, July 27th.
Good day folks and welcome to another conversation. I wanted to start my trip to Brazil today but thought I would delay it for a few days more and refocus, after your overwhelming response to Monday’s conversation.
On Monday, I mentioned that the Diaspora was missing or uncomfortably quiet regarding the financial fire, raging and could eventually reposition the financial architecture of a dependent Caribbean community.
In my humble opinion, this is the kind of conversation that will make the Diaspora movement more engaging, not barrels and cartons of used and obsolete stuff, sitting on a wharf or in a warehouse, unclaimed and racking up storage fees, while someone is being honored and recognized for exemplary and extraordinary philanthropy.
Caribbean Americans who have in excess of US$50K in savings outside the US, are coming under increased pressure to prove that those funds are legit. More importantly, those financial institutions doing business with the region are being asked to be more compliant and compliance comes with a cost, the kind that could force them out of business.
Imagine not being able to ‘send a money’ to family and loved ones ‘back home’ with the ease you now enjoy! That’s what’s under threat, folks, with no one to speak for us!
Before getting ahead of myself, let me ask. Is this a matter for the Diaspora or no? And while you are thinking of the most appropriate answer, consider for a moment the lure of the overseas job market and what it would mean if, moving here to work so you can support a family, that option is suddenly and without explanation, is taken away from you!
That’s why it’s important to be a part of the conversation and that’s why, with the kind permission of the writer Kavion Grant and publisher, The Jamaica Observer, I am delighted to share in this space and this conversation…
…The most recent development in the Caribbean financial sector is that of the threat of correspondent bankers discontinuing the provision of their services to the region. Prominent local financial institutions such as Jamaica National Building Society and Victoria Mutual Building Society have recently been impacted by this development. It has been noted that the region is not facing this issue alone. It is a challenge being faced by, primarily, developing nations on a whole.
Contextually, the region has been listed as “high risk” for taking advantage of such a service on the basis of the 2016 International Narcotics Control Strategy Report, wherein 20 Caribbean and Latin American countries were listed as major money-laundering countries. This will indeed affect the region’s outlook as it relates to its ability to have integrity in its financial systems. However, the current withdrawal of correspondent banking from the entire region by major banks in developed nations, without a clear directive, will complicate the social and economic issues the region faces and will not encourage the fight against corruption.
Governments of the region are gradually implementing fiscal reforms without drastically reverting to the social gains obtained over the past decade in an effort to address their economic condition, and by extension tackle corruption and crime. This issue of correspondent banking imposing their might on nations that are compliant to international financial regulations is not sending the right signal to non-compliant nations. It will reduce investments in the compliant States and ultimately yield negative impacts on the fight against crime and money laundering.
What then have our hard work and efforts to be compliant gained?
The issue of money laundering has been in existence since there was a formal banking system; therefore, we can agree that battling this issue will need innovation, consultation and, most importantly, incentives for those nations in compliance. The removal of the service will also drastically shift the focus of the nations, such as Jamaica, that are currently in compliance. They may very well move to participate in a series of discussions about the issue at the expense of people the institutions serve, resulting in them being cut off from the global financial system to a point.
In my view, the move to discontinue correspondent banking services with the entire region does not leave much room for innovative solutions. I hasten to point out the weakening impact on developing nations in the international trade community. A weak system was one of the reasons the region was a facilitator of money laundering and corruption.
The global market doesn’t provide the environment for developing nations, like ours, to properly innovate, because we are limited to our perpetual need to address our issues and implement steps to meet compliance and the varied conventions to tackle the “risk indicators”. In today’s global financial services sector, banks are being forced to change their models in such a way to combat the vulnerability associated with technology. This requires quite significant amounts of capital to be realized.
This proposed action by large banks in developed nations to discontinue correspondent banking in the region will, in and of itself, reduce our financial services growth rate and possibly affect the ability of our banks to compete on a global scale. The loss of revenue by compliant banks from the removal of correspondent banking puts them behind in the global market and will cause them to evolve at a pace that will not make them more competitive and able to innovatively realize change.
I strongly encourage our local banks and the Government to make known the social drawbacks this can cause and that this is sending the wrong message to the people of the region with whom the sensitization campaign about money laundering has been making great strides.
Despite this threat and the possible outcomes, banks should ensure that they embrace the idea of investing in research and new financial technologies to make cross-border money flow more efficient.
Money laundering is a serious issue, and in order for us to tackle it across this “high risk” region, we have to enter discussions with international development agencies and central banks of large economies to make adjustments to how sanctions are imposed on correspondent bankers who do business in geographically high-risk areas in such a way that compliance is rewarded.
I understand the adage that the “good suffer for the bad”, but withdrawing correspondent banking services will only complicate issues in compliant territories across the region.
Kavion Grant is a 21-year-old, third-year banking and finance student at The University of the West Indies, Mona, as well as the founder of youth group Focus Group Jamaica.
Folks, that’s today’s conversation. You have the last word. Share your thoughts, and end up a payer that all will be well in Brazil. To God be all the glory!