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Bank de-risking hits gaming companies

Published:Friday | September 23, 2016 | 12:00 AMTameka Gordon
Minister of Finance Audley Shaw.

Moves by local and international banks to de-risk by shedding correspondent banking relationships could push the local economy, and in particular, the gaming industry, into a more informal position, causing more challenges for oversight, according to Finance Minister Audley Shaw.

In comments at the 2016 Gaming Industry Summit in Kingston on Thursday, Shaw said the gaming industry could see unregulated practices taking root as operators are dropped by banks.

"We have to go cautiously on the issue of de-risking because in Jamaica's case, we already have an informal economy that has established itself to be somewhere in the region of about 40 per cent," he said.

The Financial Gleaner has learnt that several local gaming lounges have already been dropped by local banks in their effort to keep pace with the demands of international banks. They are the most recent group to be affected over the past five years. Jamaican banks began shedding business with remittance companies and other money-services businesses from at least 2011 to reassure their correspondent banking partners.

Notwithstanding, several overseas entities have opted out of relationships with Caribbean and Latin American banks amid concerns of potential exposure to money laundering.

Gaming is seen as a risky sector for money laundering since operators may not have stringent protocols in place to monitor the source of their clients' funds.

While the focus has mainly been on remittances and money-transfer services, Shaw said there are "emerging additional challenges" to the gaming industry.

"I have suggested to those larger overseas institutions who are heading in an exuberant way to de-risk - and in some cases in a blind way - that the real risk is that we could end up having our economy grow even more informal," Minister Shaw said.

The financial sector could end up "cutting off our nose and spite our face," he added.

"We have to urge caution to those who would want to target this sector now, to say 'this is another area for shutting down and de-risking'," the finance minister said.