Mon | Oct 22, 2018

Robert Buddan | The American presidency and Caribbean banking and finance

Published:Thursday | October 20, 2016 | 12:00 AM

The next American president must prioritise recovery from the catastrophic 2010 earthquake and devastation by Hurricane Matthew in Haiti. He or she must continue cooperating with Cuba against murderous drug traffickers and Jamaica must get to the centre of these operations. But other major considerations for the region are the banking system and offshore financial centres; they are being linked to tax evasion and tax avoidance, money laundering, and possible terrorist financing.

The integrity of the banking system is critical to us all. Accounts can be breached and life savings stolen. We must all take great interest in cybercrime.

But there are two other concerns. For a number of elections now, American candidates have been railing against Caribbean tax havens. The massive revelations of the Panama Papers and the Bahamas Papers have further drawn notorious attention to tax havens.

Banks keep accounts with each other across different countries, called correspondent banking. If your Caribbean bank wants to draw on an American bank for American dollars, say for business, it has to first keep some of its American dollars in that other bank. The American bank gets security and leverage against risk. If the Caribbean bank is (even unknowingly) being used for money laundering then the laundered money could find its way back in the American bank. Banks don't want to be used for money laundering and don't want to pay the cost of extra regulation.

They tighten up banking regulations to make partner banks scrutinise their clients closely and end or limit correspondent banking arrangements with them. But these actions seriously limit the Caribbean banks' ability to service their clients' foreign currency relations.

Then there are financial services. Offshore shelters set up secret accounts for their clients. These accounts might be opened to hide money so that it is not taxed or to launder drug money or secretly finance terrorism.

Severing correspondent banking ties in the Caribbean will neutralise trade and investments. Last week, I emphasised working against drug trafficking to secure the integrity of our economies and social life. Otherwise, gangster capitalism will get worse and act as a disincentive to new trade and investments.

The Americans already believe that much of Caribbean real estate, tourism, construction, and financial centres are corrupted by laundered drug money. They are also sure that they are losing billions of dollars in tax revenue hidden away in the Caribbean.

At least 16 banks in five Caribbean countries have lost all or some of their correspondent relationships already. And, here is something really worrying: since 2013, the United States Justice Department has felt that remittance services are a high risk for fraud and money laundering. If these remittance companies are subsequently restricted, this will severely impact pockets and family budgets by US$9 billion across the region. This has started happening in some territories.




The Caribbean is treating these issues as a priority. So, we must seriously enforce anti-money laundering and counterterrorist financing regulations. We need to prosecute people. We should separate issues of bank profits and protect the hard-earned remittances coming to Caribbean families. We cannot allow ordinary and innocent people to suffer.

Let us implement cybercrime/ security measures to protect our honest deposits and investments. Let us improve the integrity of offshore centres and their secrecy scores. And, we must protect remittance flows with new correspondent banking rules when we talk to the new American administration.

Our leaders must give no reason to believe they are not being sincere. They must declare their finances as integrity legislation requires and explain where any extraordinary wealth comes from. Any lack of sincerity will bring harsh penalties against us all, and the ordinary people who always pay the price.

It is more ludicrous if we have to negotiate with a Donald Trump as president, who boasts of not paying millions of dollars in taxes which, he says, shows his "brilliance". And a Trump advertisement says millions are put into the Clinton Foundation by criminals!

• Robert Buddan is a lecturer in the Department of Government at the University of the West Indies, Mona. Email feedback to of