Concerns grow in the Caribbean over US banks ‘de-risking’ process

Concerns are growing in the Caribbean about increasingly tough anti-money laundering and counter financing of terrorism (AML/CFT) measures required of US financial institutions. The measures are creating significant difficulties for banks across the Caribbean.

The difficulties are caused by US banks ‘de-risking’, essentially ending correspondent and other banking relationships because they perceive rewards from doing business with banks in less developed markets are not commensurate with the risks of financial penalties for breaching AML/CFT requirements (Trade-Based Financial Crime, 20 July 2016).

Caribbean solution

Saint Lucia’s finance minister Ubaldus Raymond told local media that the Caribbean will be hit hard by de-risking by US banks.

Saint Lucia and the rest of the Caribbean must find solutions to this problem he said.

Negative impacts

While conceding that US banks are “trying to protect themselves against money laundering and anti-terrorism financing,” the minister said this would have a negative impact on the local economy, particularly on trade.

He said this was “because businesses here have to transact with the outside world and if you don’t have a corresponding bank it will make it very difficult for them to do business.”

Correspondent decline

Meanwhile, Saint Lucia’s prime minister, Allen Chastanet, has said that no consideration was taken in the US as to how de-risking would impact on the Caribbean.

A November 2015 World Bank survey found that some 75 per cent of international banks had experienced a reduction in correspondent banking services, with the Caribbean being the worst affected.

Categories: Trade Based Financial crimes News

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