The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Cabinet minister yesterday described the correspondent banking ‘de-risking’ trend as a “major threat” to the Bahamas and wider Caribbean, calling on regulators to do their part in protecting the region.

Hope Strachan, minister of financial services, urged industry regulators to communicate the integrity, safety and security of their respective jurisdictions, and the region as a whole, to correspondent banks and their US counterparts.

Mrs Strachan, speaking at the Caribbean Group of Securities Regulators (CGSR) 12th annual conference, said: “A major threat, and one which is of the greatest significance to the region, is the loss of correspondent banking.

“The response by US banks to large fines imposed upon them by US regulators, in cases where they have been caught up in some event associated with money laundering, has been to unilaterally withdraw correspondent banking from Caribbean countries in some cases.”

She added: “This de-risking has undermined the banking industry in several countries in the Caribbean. It affects remittances that are a critical component to the economic lifeblood and cultural norms of the financial services industry in the region.

“It can affect the ability of residents and investors to effect cross-border payments that are essential to every day survival or to commerce. If sustained, it has the potential to cause the complete collapse of the economic framework of a country.

“Again, the task - and I dare say responsibility - of regulators must be to communicate the integrity, safety and security of our respective jurisdictions, and the region as a whole, to correspondent banks and to US regulators.”

Mrs Strachan continued: “Where we have established KYC and anti-money laundering regulatory framework, where we have signed TIEAs and have co-operated with requests for information, where we have completed peer reviews and have been deemed largely compliant, where we have completed, have taken steps or have committed to implementation in the area of tax transparency, with the US (FATCA) and globally with the OECD, the message should be succinct and clear.”

The Minister added that the financial services industry has changed dramatically in recent years, and continues to undergo significant change almost daily.

“The history of the evolution of the industry will show the development from secrecy, to KYC, to information exchange agreements to automatic exchange of information, all occurring in the last 15 years,” she said.

“This movement towards total transparency seems complicated but, in reality, is simple. It is fuelled by the need for our industrialised, developed global masters to ensure their citizens are paying their fair share of taxes.

“Since we are a good, cooperative, global citizen, a member of the Organization for Economic Development (OECD) [Forum on Transparency] and have considerable skin in the game, we recognise and accept our joint responsibility to ensure that the rules and regulations established to govern international and cross-border financial transactions are adhered to in every respect.

“In fact, a well-regulated industry that adheres to international standards and best practices makes the job of promoting the Bahamas that much easier.”

Mrs Strachan said she was not prepared to give up despite the challenges facing the financial services sector. “There are so many among us who are only too eager to throw the towel in, to call it quits and to give in because they see hard work ahead,” she added.

“I am proud to say that I am not one of them. What I do see is an ever-evolving and increasing role for you as regulators. Your obligations will become more and more onerous as more and more demands are placed on us as a region and as individual island nations.

“While the overarching, stated objective is to create a level playing field to facilitate tax transparency, this notion provides little comfort to jurisdictions such as the Bahamas and others within the region when cost considerations come to bear upon the implementation of reporting and regulatory systems, given the limited resources available to us,” Mrs Strachan said.

“However, in the Bahamas, with the sector providing 15 per cent of our GDP, we have no choice but to accept the burden with the benefit.

“In the midst of these more onerous obligations, efforts must be made to strategically align our global interests and obligations with our national interests, and goals to set standards that will maintain our reputation as a premier financial centre, doing our part to bolster the reputation of the region as a whole.”