CARICOM fears banking isolation

Bert Wilkinson | 7/7/2016, 12:37 p.m.
Caribbean Community leaders have given their clearest signal yet that the region is in real danger of being cut off ...

Caribbean Community leaders have given their clearest signal yet that the region is in real danger of being cut off from the rest of the world if the large American banks carry through with threats to cut ties with those in the bloc because of alleged high risks of doing business.

When they meet at their main summit in bloc headquarters, Guyana, this week, the issue of “correspondent banking” will be high on the agenda, along with the implications of Britain’s vote to leave the European Union, continued turmoil in Haiti, decriminalization of marijuana and reparations from Europe for the slave trade, among other items.

“CARICOM, and indeed the Caribbean as a whole, is concerned about this issue,” the bloc said in a statement on the weekend. “If all correspondent banking relations are withdrawn, the region will be isolated from the rest of the world and will be unable to carry out some of the most basic of bank transactions. Critical services, including remittance transfers, international trade and the facilitation of credit card settlements for local clients, among other services, will be affected.”

The issue has to do with pressure federal officials are applying on megabanks such as JPMorgan Chase and Citi to tighten up scrutiny on transactions from the Caribbean, with its well-developed and world-renowned offshore banking system, as well as those from normal commercial banks.

Feeling the stress from the feds, many of the American banks have opted to either cut off relations with counterparts in the region or hike fees, or have threatened to do so. The U.S. banks have described the current process of interacting with the region as “de-risking.”

So the leaders say they are fighting back and are “using the power of the collective,” as they have appointed “a high level advocacy group, led by the Prime Minister Gaston Browne of Antigua to represent the interests of the region in addressing the issue, including approaches to the U.N., the WTO and the U.S. Government.”

Officials preparing for the meeting say that if the highly uncertain situation persists, then the region will have no choice but to pool resources and open its own Caribbean bank in the U.S. to clear checks, handle wire transfers and perform other transactions. In the meantime, bankers have been exploring the possibility of starting relations with banks in Canada, the U.K. and even China.

The leaders have consistently argued that the region is being treated unfairly by the feds, as they seem to regard the Caribbean as a safe tax haven for criminals and financial bandits to hide ill-gotten wealth and as an area “of lax tax regimes and avenues for money laundering and terrorism financing, despite no evidence to prove this.”

Most of the 15 leaders and those from associate member states such as the Cayman Islands are expected to attend the meeting, coming at a time when Jamaica has just established a commission to review relations with the region. The island, which had voted to break up the West Indies Federation in the late 1950s, has persistently said it is dissatisfied with trade resolution mechanisms and thinks the time has come for a review.