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Kavion Grant | Banking clampdown doesn’t advance money laundering fight

Published:Wednesday | July 27, 2016 | 12:23 AMKavion Grant

The most recent development in the Caribbean financial sector is that of the threat of correspondent bankers continuing to provide their services to the region. Prominent local financial institutions such as Jamaica National Building Society and Victoria Mutual Building Society have recently been impacted by this development.
It has been noted that the region is not facing this issue alone. On the contrary, it is a challenge being faced by, primarily, developing nations on a whole. Contextually, the region has been listed as high-risk for taking advantage of such a service on the basis of the 2016 International Narcotics Control Strategy Report wherein 20 Caribbean and Latin American countries were listed as major money-laundering countries. This will indeed affect the region’s outlook and perceptions about its financial integrity.
However, the withdrawal of correspondent banking from the entire region by major banks in developed nations, without a clear directive, will complicate the social and economic issues the region faces - and will not encourage the fight against corruption.
Governments of the region are gradually implementing fiscal reforms without drastically reverting the social gains obtained over the past decade in an effort to address their economic condition and, by extension, tackle corruption and crime. The clampdown on nations that are compliant with international financial regulations is not sending the right signal to non-compliant nations. It will reduce investments in the compliant states and, ultimately, yield negative impacts on the fight against crime and money laundering. What have our hard work and efforts to be compliant gained?
Successfully battling money laundering will require innovation, consultation and incentives for those nations in compliance. This service removal will also drastically shift the focus of the nations, such as Jamaica, that are currently in compliance. They may very well move to participate in a series of discussions about the issue, which will take a very long time, at the expense of the people being cut off from the global financial system to a point.
In my view, the move to discontinue correspondent banking with the entire region does not leave much room for innovative solutions. I hasten to suggest that the weak impact developing nations have in the international trade community, because of their financial strengths, is one of the reasons why they are always the primary facilitators of money laundering - and corruption.
The global market doesn’t provide the environment for developing nations like ours to properly innovate because we are limited to our perpetual need to address our issues and implement steps to grow by various conventions and ‘risk indicators’. This action by large banks in developed nations to discontinue correspondent banking in the region will reduce our financial services growth rate and possibly affect our banks’ global competitiveness.
In today’s global financial services sector, banks are being forced to change their models in such a way to allow technology to affect it. This will require a quite significant amount of capital to be realised. The loss of revenue by compliant banks from the removal of correspondent banking puts them behind in the global market, slowing the pace of their evolution to the heights of competitiveness.
I strongly encourage our local banks and the Government to make known the social drawbacks this can cause. The pullback from correspondent banking is sending the wrong message to the people of the region, with whom the sensitisation campaign about money laundering was making great strides. However, despite the outcome, the banks should ensure that they embrace the idea of investing in research and new financial technologies to make cross-border money flow more efficient.
Money Laundering is a serious issue and possibly in order for us to tackle it in regions of high risk we might have to enter discussions with international development agencies, and central banks of large economies to make adjustments to how sanctions are imposed on correspondent bankers who do businesses in geographically high risk areas in such a way that compliance is rewarded. Notwithstanding, the current “good suffers for the bad” will only complicate issues in compliant territories and the region.

Kavion Grant is a third-year banking and finance student at the UWI, Mona, as well as founder of youth group Focus Group Jamaica. Email feedback to and