The business community in the Caribbean — both foreign and local — has made no collective statement and taken no joint position on the process of de-risking and the withdrawal of correspondent banking relations (CBRs) with which all Caribbean countries have been plagued since 2015. It seems that the overarching perception is that de-risking and the loss of CBRs is something related to financial institutions and is remote from the lives of the Caribbean’s peoples and the business communities. Nothing can be further from reality.

The de-risking and withdrawal of CBRs that have beset the region are directly related to the conduct of any business that imports or exports goods and services from the rest of the world, particularly North America and Europe, with which the region trades the most. Financial institutions, particularly banks, are only conduits through which businesses and individuals conduct business outside of the countries in which they are based. When financial institutions lose CBRs because of de-risking businesses and individuals are deprived of the means to conduct overseas transactions.

No business is immune to the consequences of local banks losing CBRs. If all the banks in a country lose CBRs, every business that buys or sells goods and services from overseas will grind to a halt. Therefore, there is very good reason for all businesses to put this matter high on their agenda for discussion. Every chamber of commerce, manufacturers’ association, and export agency in every Caribbean country should seek meetings with their banks to understand the implications of continued de-risking and loss of CBRs. And they should contribute to the thinking and financing of how the issues could be resolved.

Foreign companies operating in the Caribbean, particularly those whose domiciles are in North America and Europe, have a special responsibility to themselves to become active in this matter. To transfer their profits and dividends to their overseas headquarters their local banks must have CBRs. Further, to import material for their operations, CBRs are imperative. It is in the interest of these foreign companies, including the airlines, the cruise ship lines, oil companies, and hotels, not to sit back but to become actively involved in pointing out to governments in their home countries the dangers posed by the loss of CBRs.

Local businesses of all kinds also require banks to have CBRs to purchase anything from overseas, including clothing, footwear, construction material, motor vehicles, spares and parts, and, most importantly, food.  

The consequence of businesses not being able to import or export on the lives of people is obvious. There would be a scarcity of everything, until availability dries up, severely affecting the quality of life enjoyed even by the most well off in Caribbean societies.

Eventually, as businesses collapse, jobs will be lost, poverty will increase, governments will lose sources of revenue, and social services will come to an end.

All of this may sound alarmist. It is. But it is not unnecessarily alarmist. Businesses large and small, local and foreign, and the people of the Caribbean must understand that de-risking and loss of CBRs materially affect them. This is not a matter for financial institutions and central banks alone.

I have explained this issue in such granular terms because of the trend — even in official documents — of characterising this problem as a threat to financial institutions in isolation. The fact is that the dagger is really pointed at the societies of every Caribbean country as banks are the point of entry into the body of each Caribbean country.

It is time that education and information about the perils of de-risking and loss of correspondent banking relations be widely disseminated. It is past time for the business communities in the Caribbean to appreciate that it is their operations and livelihoods that are at stake and, in that context, to become more involved in addressing the problem.

Fifty-five banks in 12 Caribbean countries have lost CBRs over the last three years. In some countries, CBRs available to many banks have been reduced to one.  To continue to provide businesses and the public with international services banks have had to seek CBR arrangements as far away as Turkey and Serbia. Costs have risen as a result and, in any event, these arrangements, while welcome, are tenuous.

The International Monetary Fund (IMF) has observed that the loss of CBRs poses “a clear and present danger” to the region. Recently, Scott B MacDonald, the chief economist at Smith’s Research & Gradings, a US financial credit grading company, concluded in a report that, “The new status quo is one defined by tenuous linkages to the global financial system, which can leave trade, finance and tourism at risk of being strangled.” That is not a prospect that any single person or business in the Caribbean can afford. Everything must be done to prevent it!

Much has been done already. Governments have enacted legislation consistent with the rules set by the Financial Action Task Force on anti-money laundering and counterterrorism financing. They have also established machinery for enforcement of these rules through investigation and prosecution. Banks are being made to comply by regulatory bodies and central banks. All this is necessary to persuade correspondent banks in North America and Europe that there is minimal risk in providing CBRs to respondent banks in the region.

However, compliance with the rules is not enough. Correspondent banks in North America and Europe are also concerned about the huge penalties they might have to pay if any infringement of the law occurs. They believe that the relatively small amount of money they earn from individual Caribbean banks is not worth the risk. That, in large measure, is why they are withdrawing CBRs.

For this reason, Caribbean banks should create one or two adequately capitalised entities to act as their collective agent with correspondent banks. In this case, it is truly “unite or perish”. And, the broader business community should join in. It’s in their interest.

Sir Ronald Sanders is Antigua and Barbuda’s ambassador to the US, Organization of American States, and high commissioner to Canada; an international affairs consultant; as well as senior fellow at Massey College, University of Toronto, and the Institute of Commonwealth Studies, University of London. He previously served as ambassador to the European Union and the World Trade Organization and as high commissioner to the UK. The views expressed are his own. For responses and to view previous commentaries: www.sirronaldsanders.com.