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Crisis in Correspondent Banking and its Impact on Caribbean’s Sustainable Economic Development

For Release Upon Receipt - Thursday, February 23, 2017

Five months after its launch, the SUNY-UWI Center for Leadership and Sustainable Development hosted its first major public event—a Symposium titled “The Crisis in Correspondent Banking and its Impact on Sustainable Economic Development in the Caribbean”. The symposium which attracted finance and banking experts took place at the SUNY Global Center in New York on Monday, February 13, 2017.

The symposium was aimed at creating greater awareness about the impact of the increasing and arbitrary withdrawal of correspondent banking relationships from the Caribbean, the resultant loss of capital at a time when Caribbean economies are struggling and the adverse impact on regional trade and business. Speakers and panelists painted the issue as one of severe challenge for Caribbean economies, with all countries affected and some islands having lost as much as 60% of their correspondent banking relationships.

Correspondent banking—which is the operation of intermediary banks providing financial services on behalf of another, in foreign jurisdictions where the beneficiary bank cannot operate—and the diminution or loss of these relationships is of serious concern to financial intuitions in the Caribbean and diaspora in the US. In his welcome remarks, Ambassador Dr Richard Bernal, Pro Vice-Chancellor Global Affairs at The University of the West Indies stated that “By focusing on the issue of correspondent banking and its impact on the economics of correspondent banking, the symposium gives meaningful expression to the policy related work of the [SUNY-UWI] Center”.

He explained that theForeign Account Tax Compliance Act(FATCA) which was passed by the United States in 2010 offers the background of the issues related to correspondent banking. The act requires individuals living both in and out of the US to file annual reports on their financial accounts outside of the US and all foreign financial institutions must provide information on assets and transactions on US persons with the US Treasury. The act was passed in an effort to improve tax compliance and collection from US citizens who own assets outside the US as well as reducing money laundering and money going to terrorist organisations.

However the challenge is that FATCA inadvertently has serious implications on the small developing countries in the Caribbean. Ambassador Bernal noted that while the issue of correspondent banking is currently an important conversation worldwide, it is of particular importance for the Caribbean which is most severely impacted by the crisis of correspondent banking and especially relevant in New York as the leading financial centre in the world.

Delivering remarks on behalf of the SUNY system, Dr Merodie A. Hancock, President of SUNY Empire State College said, “The restriction or loss of correspondent banking relationships affects every level of society and economy. When the SUNY-UWI Center was launched, SUNY and UWI affirmed a shared vision for international dialogue and solutions-based research for Caribbean countries and their citizens at home and in the diaspora. It is part of the role of the Center to help envision and articulate solutions to the new and emerging development challenges faced by the Caribbean region and its people”. She also stated that “This matter of correspondent banking is not esoteric; it has been described by financial experts and commentators as an existential issue. Access to capital is essential to the quality of life and development of Caribbean countries and their citizens”. President Hancock made the point that remittances are worth US $10 billion annually to Caribbean economies and that over 4 million Haitians were waiting to remit money to Haiti, but that the loss of correspondent banking relationships was preventing them from making these financial transfers.

Sir Kenneth Hall, former Governor General of Jamaica representing The University of the West Indies’ Vice-Chancellor, Professor Sir Hilary Beckles at the symposium, expressed that the establishment of the Center reflects a need by both universities, particularly to have researchers and policymakers address this crisis facing the Caribbean. On the correspondent banking issue, he averred, “What this represents is a disruptions of relationships that have existed at the private sector albeit in banking which now threatens the public sector and indeed relationships across the board. It is no longer simply a banking issue”.

The symposium’s keynote speaker, The Rt. Hon. Owen Arthur, Former Prime Minister and Minister of Finance, Barbados asserted that “The totality of the challenge which has been thrown out by the correspondent banking crisis confronts the Caribbean with the biggest single threat to its sustainable development in modern times”. He added, “It is however also in the Caribbean’s best interest that rules and standards which have been set to govern the behaviour of financial institutions be fairly and uniformly applied. As such the core of the crisis as it concerns the Caribbean is that the rules that have been set are not being followed and that the Caribbean has been more adversely affected by the breaches of these rules than any other group of countries. To be precise, the guidelines formulated by the financial action task force require financial institutions to adopt an approach whereby they seek to mitigate rather than avoid risk”.

Former Prime Minister Arthur further articulated his position that, “In consequence financial institutions should only terminate customer relationships on a case by case basis where the money laundering and financial terrorism risks cannot be mitigated. However the wholesale cutting loose of clients and various types of businesses without evaluating the risks they pose, were not intended to be a substantive part of the fight against global financing of terrorism and the fight against money laundering. …but it is precisely where the global financial community is increasingly heading”.

The symposium also included a dynamic panel discussion featuring Professor Compton Bourne, UWI Professor Emeritus and former President of the Caribbean Development Bank; Dr. Damien King, Co-Executive Director of the Caribbean Policy Research Institute and Head of The UWI Department of Economics, Mona Campus; Dr. Trevor Alleyne, Assistant Director, Caribbean I Division, International Monetary Fund; and Dr. Alfred Ntoko, Provost, Empire State College, The State University of New York.

End

The recorded stream of the symposium is available at http://gc.mediasite.suny.edu/Mediasite/Play/b49e068224cd46cfaaaae02dd08a6a641d










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