Wells Fargo, Bank of America (BOA), Citibank and JPMorgan Chase are now purging their risk compliance portfolios of their “soi-disant” risk laden correspondent banking business, amid an overkill of tightening, some what xenophobic imbued, US Treasury regulatory dictates, thus ending relationships with many regional banks across the predominately Black nations of the Caribbean (and Africa) over the last four years. They call this behaviour “de-risking” or “de-banking,”
We are led to believe that the enhanced obsession concerning financial fraud regulations, supposedly designed to stem money laundering, tax evasion and terror financing, are the predominant reasons for leaving many small Black “emerging market” (developing economies) in the Caribbean Region without access to Global banking. However, this author questions the real motives of these banks laying the blame entirely on the doorstep of U.S. Treasury regulators because, spurred on by greed (which was at the front and centre of the 2008 financial crisis in which these banks played major roles), it is most likely that serving as a correspondent bank for small banks in emerging markets such as those in the Caribbean Diaspora is just no longer profitable.
The island nations of the Cayman Islands, Montserrat and Belize are egregious examples of small countries in the Caribbean which, if we are to hold the reasons given for the discontinuance of banking services to their local banks be true, we must somehow bring ourselves to believe that these small, somewhat innocuous countries, are, unbridled drug dealing money-launderers, flagrantly engaging in terrorist financing, and actively assisting U.S. citizens with aggressive tax evasion schemes. What irks this author is the fact that, the chalk talk one receives when querying the why of this new narrow-minded and decidedly biased U.S. correspondent banks’ behaviour, presumes that the political leaders in all of the Caribbean nations are somewhat developmentally challenged, meaning that their governments are incapable of complying with the OECD...the FATF….the FATCA…..the AML/CFT...FBAR regulations….and for these jurisdictions...more! Does anyone really believe this “de-risking” theory, that suddenly appeared out of the blue yonder for no other reason than an attempt by the Obama led “world financial domination” efforts to perpetuate its all to often xenophobic tinged foreign policies? As we say in the “old country”….go figure! But...whereas this train of thought may seem to many to be far-fetched, the United States does not (and probably never will) present itself in relationships with Black nations as anything other than not very user-friendly.
There are no Caribbean nations listed on the latest publications by the FATF naming high-risk and non-cooperative jurisdictions. There are no Caribbean nations identified with AML/CFT deficiencies in the FATF Public statements (call for action) or on-going monitoring. Several international banks have used FATF as the scapegoat for taking recent de-risking decisions, thus they have denied entire classes of consumers (poor and mostly people of colour) financial services without initiating comprehensive assessment of and on any competent level of risk or risk mitigation.
However, if we look deep below the surfaced of the typically forked-tongue spiel for which most major bank CEOs exhibit a seemingly professional talent, more tangible reasons strongly suggest that major U.S. and international banks are just so browbeaten and terrified by US multi-million dollar fines and sanctions that they have adopted a “rather never than safe” approach. Nonetheless, these same institutions stand idly by as major US banks have been found culpable of flagrant criminal violations of regulatory and banking laws for money-laundering and facilitating the banking of drug money, including drug cartel money from Mexico. There has been no clamouring of outrage, no “de-risking of US banks, even though we estimate that 40% of the illegal funds from the US banking system transited Euro country banks.
We are now at a point that continuing to “beat up on Central banks in the Caribbean is becoming somewhat ludicrous because one can “comply but so many times”. And, the financial leaders of many of these “de-risked” jurisdictions “jump whenever ‘massa rings the doorbell” but can only do the same thing, over and over and over, before any progress made becomes redundant….especially if each step forward yields only more challenges that are, in most cases, always orchestrated after the fact.. Now...de-risking.
What’s occurring in the Caribbean is part of a larger machination in which tighter and heavy handed U.S. mandated banking regulations are prompting the world’s top financial institutions to avoid not just known terrorist groups (and this is also a misnomer, catch all, concept that includes everyone including the repairers of the kitchen sink) but also cash remittance services, charities, foreign embassies, and other classes of customers, most of whom have no role whatsoever in any criminal activity. Everybody is now guilty of something! There should be a smart phone app that we can consult every morning to determine exactly what national offence we will guilty of for that day. The constantly changing, all inclusive regulations of the U.S. have become (as most would agree) a “cash cow” providing heavy handed fines for transgressions that U.S. banks commit daily with less punitive measures being dispensed. This heavy handed effort to refuse banking services to developing countries threatens and literally cuts off financial access to the world’s poorer nations and, so we do not miss the point, 80% of these countries are Black nations.
The increasing volume of remittances generated by migrant workers and the impact of this financial flow on the development and poverty reduction in receiving countries is primordial for thousands of families. In short, remittances to the tune of over $150 Billion dollar per year now play an essential role in sustaining national and local economies in many recipient countries. Remittances provide an important source of foreign exchange to recipient countries, boost the capacity of the financial sector and help to attract subsequent investment. Remittances evidently provide the most direct and immediate benefits to the people who receive them, many of whom, the World Bank has established, are amongst the poorest members of society ((World Bank 2006 International remittances and Migration). Remittances help to lift recipients out of poverty, increase and diversify household incomes, provide an insurance against risk, enable family members to benefit from educational and training opportunities and provide a source of capital for the establishment of small businesses.
The recognition of the positive impact of remittances on the economies of developing countries like the Caribbean islands is important and must be promoted. In this context, the governments of sending countries like the U.S., UK, Canada, France, Belgium (to name a few) must adopt sound exchange rate, monetary and economic policies, facilitate the provision of banking facilities that enable the safe and timely transfer of migrants' funds. They should also promote the conditions necessary to increase domestic savings and channel them into productive investment.(Yavuz KϋL: Opportunities And Challenges of International Migration For Sending and Receiving Countries.)
However...a BRAVO is in order to the tiny island of Montserrat. BOA shut them down. They got up...pulled themselves together rather than crying in their soup and worked diligently to retain correspondent banking relations in Europe. It ain’t the best in the world...but..Hey!...what’s important is it works so that the citizens of this country do not slide down into an irreversible financial abyss. These islanders should be proud of their leadership who took the “bull by the horns” and did something concrete.
As we all have learned, Caribbean ministerial delegations travel to Washington, hats in hand, to seek assistance in remedying the financial turmoil caused by the so-called “de-risking” of U.S. correspondent banks in the Caribbean but, to no surprise for many anxious on-watchers, returned home with only the lingering taste of tea and crumpets in their mouths. The U.S. Treasury showed little interest in the plight of their banking difficulties in the Caribbean region…..we take that back...they do care about the survival of Scotia Bank, RBC, First Caribbean etc. as these are, by definition, not Black owned banks. No need to comment further!
Both Wells Fargo and BOA have established flagrant, documented, track records of imposing fraudulent criminal financial scans on their own local American depositors. Wells Fargo flagrant clashes with regulators and District Attorneys...have yielded Billions of dollars in fines. De-risking? They need to establish “de-risking” in the back offices of their bank management operations in the United States, much less using the term to get out of servicing Black nations with Black owned banks.
Therefore, the question of “is it time for Caribbean EC countries to drop the U.S dollar peg” now looms front and centre stage. The EC currency countries that have their currencies pegged to the U.S. dollar have not demonstrated that their economic performance has made them more economically competitive than other CARICOM countries with floating exchange rates. This author will go out on a limb and offer his belief that these countries have not faired as well in the open market place as they expected and, as is often the case in their somewhat fudged claims. If one believes that by the year 2020 no local, home grown Caribbean banks will have U.S. correspondent banking relations, the question must again be asked: “so why do you need to be pegged to the U.S. dollar?
In June 2015, Sir Ronard Sanders (Antigua and Barbuda’s Ambassador to the U.S.) answer this question with unsurpassed clarity and forethought in an article published in the Antillean Media Group the above question:
“…..However times have changed. Aid and investment from the US has dwindled. Businesses in the region now have to be competitive on world markets and in their domestic markets against imports from which there can no longer be import duty protection. The rules of the World Trade Organisation, which give no special or differential treatment to small states, have put an end to protection of local businesses. The unequal reciprocal arrangements of the Economic Partnership Agreement between the entire European Union as a bloc and individual Caribbean states put another nail in that coffin.
For its own domestic purposes, the US Government has adopted policies designed to keep its dollar strong against other currencies. Therefore, for those countries whose currencies are fixed to the US dollar, the cost of their exports to, and tourism from, other major markets is expensive and uncompetitive. Local manufacturers, farmers and service providers also face severe competition in their own domestic market from non-US countries.
To re-enforce the point, tourists to CARICOM countries as a whole are mainly non-US. Therefore Caribbean countries, whose currencies are tied to the high value US dollar, are prohibitively expensive for non-US tourists. Further, the US is no longer the principal source of Caribbean imports. Consequently, the cost of imports from non-US sources is high and raises the cost of living.
The currency link to the US dollar brings no benefit other than for exports and imports to and from the US. In essence, the only market where the region operates on a level playing field is the US. World trade is increasingly no longer dominated by the US or by the US dollar. The Chinese yuan, the Japanese yen, the Euro, British sterling and even the Hong Kong dollar are assuming growing importance. China now rivals the US in global trade; indeed, for many countries, China is now the main trading partner. In the Caribbean, imports of Chinese products are so high that China enjoys a large trade surplus with the entire region (including those countries with which it does not have diplomatic relations).
While there are many challenges that governments and the private sectors in CARICOM countries need to address in order to deal effectively with the problem of a lack of economic competitiveness, a fixed exchange rate tied to the US is one policy that should be scientifically reviewed. Setting their exchange rates against a basket of currencies, particularly the currencies of countries with whom their trade is increasing, such as China, and those from which the majority of their tourists come, would seem to be considerably more advantageous. By continuing to tie their currencies to the US dollar, countries also seem to be linking their fortunes to the policies of the US alone – policies that are made rightly in the interest of the US alone.
In a world dominated by free trade, a fixed exchange rate appears to be an anachronism and inimical to the international competitiveness of Caribbean countries. The fixed exchange rate between the US dollar and the currencies of the nine CARICOM countries named earlier, may be contributing to a weakening of their international competitiveness. It would be useful if the governments were to commission an independent study by leading Caribbean economists – and there are many capable of doing the job – to provide objective advice on the exchange rate.
If the nine can’t do it together, the individual governments of the Eastern Caribbean Currency Union should consider it. ……..
Following the 2009 G20 summit, plans were announced for implementing the creation of a new global currency to replace the U.S. dollar’s role as the only world reserve currency (Point 19 of the communiqué released by the G20 at the end of the summit) America is beginning to be perceived as a global bully, with almost 21 Trillion Dollars in national debt. They owe Japan and China $3 Trillion and print about $700 Million per day while a little known fact now looms as very important:...
The writing is on the wall. This is a very important point to consider as the Caribbean nations work feverishly to align their currencies, banking, foreign exchange, and regulatory needs. If, and when, the US dollar plunges; if and when the US economy tanks (and many well regarded economists so predict)...there go the “pegged” currencies also. As of September 30, 2016, the yuan was officially added to the SDR, having been approved by the IMF in November 2015. Approval was granted due to the dramatically increasing number of global transactions being conducted in “yuan”. If the Chinese are willing to invest $8 Billion throughout the Caribbean region serious consideration should be accorded to in-depth discussions on how Caribbean nations can align their economies and banking with a couple of International Chinese banks. Makes sense to me!
U.S. correspondent banks allege that their earnings from correspondent banking relations with Caribbean banks is so minimal that it is not worth the risk. What risk? A few insignificant million dollars. Speaking of risk! Two million Americans depositors of Well Fargo (more than the populations of Trinidad & Tobago and Barbados combined) have just learned about a five to seven year scam that their “largest bank in the world” perpetuated on them. Now this is what I called “risk” banking because if you are a depositor of Well Fargo you will be scammed for every single farthing that they can finagle out of you. If this be true, again we seek to point out that all the “hoop-la-la” disseminated by the United States about the Caribbean Region being of such “high risk” is just so much folly. Nothing more….nothing less!
I guess most would not be shocked to discover that a group of the largest banks in the world, the very ones the United States Treasury spent almost $700 Billion of a larger pool to bail out the U.S. financial system in 2009, have since antied back to the U.S. a cool quarter of a trillion dollars so far in the way of fines for engaging in some of the very behaviour that required they be bailed out. This same behaviour is now ripe for fantasizing that “Blacks”, who own small, never heard of, banks in the Caribbean region must be doing the same thing. With what? With whom? For whom? For what purpose?
The United States always seems to ignore the facts: the largest money-laundering transactions to date have been perpetrated by major U.S. and European banks which include Wells Fargo (Wachovia sanctioned ($160 Million) for laundering $420 Billion), HSBC ($2 Billion in fines), BOA ($16,5), and European giants such as Deutsche Bank, Commerzbank, Standard Charter, BNP,...(and the list goes on). Never once have the names of small, insignificant, Caribbean banks been cited for anything but “imaginary fantasies” of aiding U.S. citizens in tax evasion concocted by the xenophobic thinking of many “die-hard” U.S. political leaders, most of whom have never set foot in the Caribbean region.. Caribbean banks are not big enough to handle even .ooo1% of the 2 Trillion dollars in illicit funds that “mingle here and there” with “good, clean funds of non-criminal origin”.
For these banks to now shut down correspondent banking relationships with small Black owned or managed Caribbean island Banks using the now infamous phrase “de-risking” means only one thing: “Somebody...somewhere has a very morbid sense of humour”. The recent Senate and House hearings conducted during the month of September, 2016 in Washington D.C, (and televised on C-Span for all to see) during which the present (now resigned) Chairman/CEO of Wells Fargo, John J. Stumpf, had his head severed from his body and then handed back to him on a platter by bi-partisan rage concerning the illegal (many believe criminal) antics originated and orchestrated by his bank over the last seven years says it all.
U.S. correspondent banks have no commitment to assisting Black emerging markets in their efforts at developing their financial sector and this author sincerely hopes that in future (and the future will one day be bright) political leaders in the Caribbean region will remember those banks and countries that threw their local economies under the bus.
The somewhat shady shenanigans of BOA are not much different from Wells Fargo, as since the “financial crisis” it has paid over $101 Billion dollars in sundry fines. And.. these fines have nothing at all to do with the Caribbean Region even though we believe that BOA probably tried desperately to find some link between their criminal activities in the USA and servicing certain “teeny-weeny” insignificant banks in the Caribbean region …
In an article published in the Caribbean American Weekly on 15 Sept, 2016 (U,S, Official Wants Caribbean Nationals Help to Shape Foreign Policy), Juan Gonzalez (Deputy Asst. for Central America & Caribbean Diaspor) at the U.S. State Department) is quoted as boasting that the “ US has a "special interest in the Caribbean," which is aimed at seeing "prosperity and security" in the region thrive, proudly disclosing that Washington has provided $417million to the Caribbean since 2011. How are we to understand “prosperity and security” when needy local citizens are still deprived of the ability to receive funds from migrant family members or send money to the U.S. for the purchase of goods? What good is $417 Million in aid over a period of five years when poverty and unemployment statistics have been increasing at an alarming rate. Compare this figure to Chinese Investments.
Aid from the United States to members of CARICOM has been falling since the 1980s, said Richard Bernal, former Jamaican ambassador to the U.S. and current director for the Caribbean at the Inter-American Development Bank in Washington. On the other side of the spectrum, since 2011 China has either concluded loan agreements and gifts and/or committed to funding projects throughout the Caribbean Diaspora to the tune of over $8.76 Billion Dollars. Now this supports prosperity and security! We never realize how important it is to define terms we use incorrectly.
What is sad is that the very thing that the U.S. government in its typical inimitable style is attempting to remedy is now beginning to appear in the shadow banking that has already begun throughout the Caribbean. And, perhaps Caribbean leaders should embrace some of the “old ways” that poor Black Caribbean consumers did business when “white” banks refused them accounts. Some island institutions have now had to resort to physically transporting cash funds between islands by boat due to a closure of their accounts. Cash laden private financiers, their safes bulging to the brim with dollars, Euros, Yuan, Pounds Sterling, have now stepped into the correspondent banking void.
...Tom X in Brooklyn needs to send money to his brother in Belize..but no Western Union readily available. So he goes to see Mr. B (a retired numbers runner in Brooklyn)...gives him the money plus a fee. Mr. B makes a phone call or sends an encrypted email to Mr. BB in Barbados….who immediately contacts Mr. C. in Belize. Money delivered! I guess the U.S. Treasury did not anticipate this development. What is important to note is that many governments like the USA impose stringent regulations on other countries but have no idea of the survival techniques that have been an intricate part of the fabric of local cultures since time and memorial.
Back to the days when men of dark character, sat in the back of smoke filled cafés (now called “rum bars”, lending money to all comers with the only security being “knee-caps or else”. Yes! Even bankers can borrow funds to satisfy their customers…. expensive but it works. So much for the “ranting and raving” about money-laundering. When we become so blinded by artificial intelligence, the end product is always chaos. Obama was determined to withdraw all troops from Iraq. He did...and today we have ISIS who filled the void. He thought he meant well, but…..
Three years from now, the U.S. government will be clamouring for regulations to stem the tide of Hawala transactions…. least they be reminded “ you created the hole...somebody else filled it”.
The $8 Billion presence of China throughout the Caribbean has prompted some to question China’s “hidden agenda”. It does not take a rocket scientist to figure this out especially given the USA-China tensions in the China Sea. However, when you need infrastructure, hospitals, health care, schools, industry, manufacturing, desperately need employment opportunities for local residents discussing “hidden agendas” is just so much palavering.
The Black Caribbean nations sit on the very doorstep of the United States and this author fails to understand the reasons why these islands receive such shabby regard. The boasting by Deputy Assistant Gonzalez of American aid of $417 Million since 2009 is equivalent to “throwing a poor dog a bone”. Americans tend to believe that anything Caribbean or Mexican is drug related, tax crimes related or crooked...and yet, the biggest consumer of illegal drugs is the United States. The billions of dollars generated by drug cartels is earned, and often banked, in the United States. Does anyone believe that these cartels are sniffing around the Caribbean region looking for tiny banks to make billion dollar deposits? The thought of this is so far fetched that it borderlines on lunacy.
In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. When the "deferred prosecution" had expired, the bank was in effect in the clear but It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine. More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business. (The Guardian, Drug Trade, by Ed Vulliamy, 2 April 2011)
"Wachovia's blatant disregard for U.S, banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement. (The Guardian. Com: 2011 How a big US bank laundered billions from Mexico’s murderous drug gangs)
Daniel Glaser, the U.S. Treasury assistant secretary for terrorist financing is quoted as saying that his agency is working with Caribbean countries to better “understand” their challenges to losing correspondent banking and how to improve their banking supervision. What is there to figure out? He doesn’t know? ...then perhaps he needs a different job. Start by regulating banks like Wells Fargo who opened over 2 Million bogus and fraudulent bank accounts for people who had no idea that they had accounts and credit cards. These customers were then charged bogus fees for a sundry number of reasons on accounts and products that they never knew they had. This author will go out on a limb by stating that it stands to reason that out of the 2 Million bogus accounts there had to be included at least 5 terrorists and I challenge anyone to dispute this theory because there was no risk-management involved whatsoever. Bank employees even went so far as to sign the applications forms for account openings and credit cards instead of the targeted “ customers”.. So much for terrorist financing and supervision of U.S. banks.
Another misnomer that is bantered about: No! Terrorist groups are not going to Belize or Montserrat to finance anything. Terrorists or drug-cartels have bigger and better things to do than get involved in money-laundering through banks in a jurisdiction that may be susceptible to stealing their funds. They use BOA, Wachovia (now Wells Fargo), and other sundry banks in the U.S. Let’s be real! Wells Fargo stole millions of dollars from its customers in the USA between 2009 and 2015. Over the last 10 years perhaps $75 Million has been seized from terrorists groups….not the billions of dollars that the U.S. wants everyone to believe. ISIS does not use banks...they conduct “cash in hand” transactions, and trust me, they are not about to descend into the Caribbean region, with alleged billions of dollars in suitcases, seeking to find deposit accounts with banks that have a net worth of less than $50 Million.
What concerns this author is the fact, that for whatever reasons offered (and there are always those who seek to express their deceptive illusions) those who suffer strangling injustice are always Black nations. The injustices of racism, discrimination, racial profiling, and disaffection, among many other unfathomable issues, are endemic to the xenophobic treatment of people of colour around the world. The xenophobic conscious of U.S. political leaders has a long history, back one hundred years, to post-slavery days. The same xenophobic leaders attempted to strip America’s first Black president of all dignity, a phenomena that has never before been witnessed in the USA in respect to decorum and behaviour towards a president of the most powerful country in the world. Black nations and their leaders have been stripped of all dignity and it boggles the mind that U.S. Treasury policies are pushing the Black nations sitting in their backyard into poverty and collapse. But xenophobia plays tricks on the mind in that it leads people to believe that even though they are depriving 43,569,689 local citizens of colour in the Caribbean Region of Billions of dollars in financial and economic needs this behaviour has nothing to do with race. It has everything to do with race.
“….If we Black people everywhere cannot gather the resources within our powers to exert real changes and restore our dignity, we will continue to be seen as weak (Chigozle Obidma, FP, Aug 9, 2016)
We will continue to be subservient to radical xenophobic policies imposed on Black countries by foreign. governments. Colonialism is still alive and well! It has not disappeared...Americans now call it “de-risking”. As long as Black nations continue to be totally dependent upon “white nations”, who thrive on tokenism, not progress, they will continue to fight losing battles. We will continue to sit by as Black owned banks are closed, as our Black children’s educations falter for lack of schools and qualified teachers that we cannot pay, as we see death on the doorstep of incredibly poorly staffed and attended Black run hospitals, with no medications on their shelves. We will continue to see Black nations’ economies descending into an abyss to the point it will take another decade for many Caribbean nations to rise again from the ashes of economic disaster.
Like the small island of Montserrat, it is time for Black nations in the Caribbean to rise from the ashes ...to rise above the fray. It is time to realize that “political delegations to Washington D.C. will always be for naught” because these visits are always with our Caribbean leaders appearing on the doorsteps of their “masters”, hat in hand. Black leaders of Caribbean nations should realize that their plight is not that much different from those millions of Black Americans who languish in the backwaters of hell and economic dungeons of the richest nation in the world. If the U.S. government cannot remedy its own xenophobic inspiredl problems, human services problems, education problems, unemployment problems of Black youth in America, income disparities between Whites and Blacks in their own country, what makes the Black heads of state from the Caribbean and Africa think that they will fare better at being heard in Washington D.C?
We will never be independent or free when someone else controls our finances; when someone else other than “we”, controls our banking sector; when someone else controls our communication systems; when citizens of Black nations have to line up for hours on end to secure a ten day visa when, as a rule, such formalities are normally granted “on the spot” in OECD countries. We will never be independent or free when we are forced to sit by, helpless, watching an infant or love one die for lack of medications or professional health services because the local economy has tanked due to "DE-RISKING".We will never be independent or free when others have usurped our very souls.
David Howell LL.B, LL.M, PhD
Mageret Bashir CMA, CS, LL.M
ARE U.S. BANKS' DE-RISKING POLICIES FOR BLACK NATIONS XENOPHOBIC?