As she testified before the United States Congress last Wednesday, Barbados Prime Minister Mia Mottley made a plea to policymakers to reexamine regulations on correspondent banking in the Caribbean made to counter terrorism and money laundering as they have made the region globally uncompetitive.
Mottley said the stiff regulations make it an especially arduous task for persons conducting wire transfers or simply trying to open a bank account.
“We are here because [of] the listing process that has taken place, whether through the Financial Action Task Force (FATF) or the OECD (Organisation for Economic Cooperation and Development) or further as a result of actions taken for enhanced due diligence by those who take the listings from the FATF and OECD,” Mottley told the United States House of Representatives Committee on Financial Services.
“…When we were growing up, opening a bank account was a part of our rites of passage in becoming an adult. Today, it is now a gargantuan obstacle for us to have our people do so, given that we spend weeks and businesses come into our region (for) weeks and months just to open a bank account as individuals to live and as companies to trade and do business,” she also noted.
Mottley was invited by Chairman of the Financial Services Committee Maxine Waters to testify at the hearing in a session focused on the crisis of bank de-risking in the Caribbean. It was titled ‘When Banks Leave: The Impacts of De-Risking on the Caribbean and Strategies for Ensuring Financial Access’.
A second panel also presented at the nearly four hour long session and included Wendy Delmar, CEO, Caribbean Association of Banks; Wazim Mohamed Mowla, Assistant Director and Lead of the Caribbean Initiative, Adrienne Arsht, Latin America Center, Atlantic Council; Wayne Shah, Senior Vice President, Financial Institutions – Head of Caribbean Region, Wells Fargo Bank and Executive Director, Financial & International Business Association (FIBA); Amit Sharma, CEO, Founder, and Director, FinClusive; and Liat Shetret, Director of Global Policy and Regulation, Elliptic.
Trinidad and Tobago Prime Minister Dr. Keith Rowley was also present at the hearing along with other officials from other Caribbean countries.
The Barbados Prime Minister said that when the changes were made around 10 years ago it meant that correspondent banks “made a judgment that we are simply too small, as I’ve just told you, in order to get involved because the enhanced due diligence means increased cost of regulation, increased cost of compliance. And rather than do business with us, they say, ‘Thank you but no thank you’.”
Pointing out that some 30 per cent of their
correspondent banking relationships in the Caribbean has been cut, leaving affected nations grappling to cope, Mottley said that it was only time before some start looking for alternative avenues.
With the number of regulatory requirements compounded by the continued pulling out of US banks from the region, Mottley said that Caribbean economies face grave setbacks as it is known that they are not independently sustainable. “We do not make enough clothes, we do not produce our own food, and we do not produce our own equipment. And, therefore, unless we can trade with the rest of the world, we are at risk of becoming financial pariahs,” she contended.
She told the hearing that “There is no benefit in driving our countries underground or making our countries uncompetitive such that our economies are at risk of becoming underdeveloped or failed states.”
Mottley opined that if one were to look at the list of high risk countries and those which were not, there would be a clear indication of racial bias. “Look at the list of countries who are listed and you will see they are all former colonies and people of colour,” she said.
“And look at the countries, in spite of being able to open a bank account in hours in Delaware or Wyoming, within hours in Luxembourg or Zurich, and they remain off of this list that speaks about the risk to money laundering and look and see where the divide comes.”
The Committee Chairperson had also pointed to biases in her introductory statement and said that Mottley’s appearance was giving voice to a topic that matters to every person in the Caribbean and everyone in the United States too.
“Today’s testimony by Prime Minister Mottley isn’t just timely; it’s historic. It marks the first time in nearly 40 years that a Prime Minister will testify before Congress. Her presence today underscores the gravity of this issue and the urgent need to take serious steps to end the deterioration of global financial access for her nation and the whole of the region,” the Committee Chairperson said.
Ignored
Waters opined that for too long the lack of financial access faced by Caribbean nations and their majority Black populations has been blatantly ignored.
“As Chairwoman of the Committee, and even long before I assumed the Chair, I’ve worked with stakeholders to combat the de-risking we’ve seen harm businesses and families across the Caribbean and the United States for more than 10 years. Financial access is key to a nation’s stability, but for our neighbour island nations, whose economies rely on cross-border transactions, they’re being denied this path to prosperity and resiliency,” she said.
“The Caribbean is very close to the United States, not only in geography but also in its shared economy, culture, and security. This is reflected in the mutual trade and tourism, which fuel jobs and economic growth, here and in the region, as well as in the 8.5 million members of the Caribbean diaspora community who have chosen the United States as their home. We must acknowledge that our nation’s security and wellbeing is directly linked to that of the Caribbean nations and that dwindling financial access endangers these mutual benefits,” she added.
A Democrat representative for California’s 43rd congressional district, a region in the United States with a high migrant population, Waters said that not only does the lack of corresponding banks in the region impact remittances, but without action the United States could risk those countries turning to China and Russia.
“Without action on this issue, we risk ceding our leadership in this region to countries like China and Russia, which have been working hard in recent years to become more active in the Caribbean. It’s clear that combatting the loss of United States correspondent banking relationships in the Caribbean should be a mutual priority for both the Caribbean and the United States.
Solving this crisis requires us to work together, from government examiners to correspondent banks and civil society organizations, to international financial institutions and standard-setting organizations. Congress has a role, too,” she highlighted.
She said that under her leadership, the Committee will continue “to press for action on the collaborative solutions needed — solutions like removing any unsubstantiated stigma of the region in government reports, and helping streamline bank examinations, to name a few.”
“Now’s the time to move on these measures,” she added.
Patrick McHenry, Republican representative for North Carolina’s 10th congressional district, pointed out that over reporting posed a risk for the US as China could use it as an opportunity to extend its financial reach in the Caribbean. “As a matter of American policy, why are we driving people away from our friendship, as a nation, and seeking a country that does not adhere to rule of law or our concept of human rights and our struggle with human rights to improve?” he said.
He told the Committee, “The question of the day is this, ‘where do those de-banked customers go?’ China.”
