‘Give us a level playing field’
BARBADOS Prime Minister Mia Mottley on Wednesday appealed to the United States to reverse its decision to put policies in place that have resulted in its financial institutions opting out of correspondent banking relationships with Caribbean counterparts.
Mottley, who was the first prime minister in 40 years to testify in the US Congress, made the plea as she appeared before the US House Finance Committee as part of a string of appeals in recent years from Caribbean governments about the matter.
“We are here because we are fighting for a global public good,” Mottley told the committee that is led by California Democrat Maxine Waters.
The Bajan prime minister told the committee that while she acknowledges that the US Treasury’s guidelines were aimed at preventing money laundering and terrorism financing, they are having deleterious consequences on regional economies while forcing those who wish to do business in the Caribbean to find alternative means of doing so. “Investors will go elsewhere if they can’t get banking services in the Caribbean,” she argued.
The result is “every country in the Caribbean, with the exception of two or three, has lost 30 per cent of correspondent banking relationship,” according to Mottley.
“Those correspondent banks over the course of the last 10 to 12 years, have made a judgement that we are simply too small…because the enhanced due diligence means increased costs of regulation, increased costs of compliance. Rather than do business with us, they say, thank you, but no thank you.”
That is because the US-based banks, rather than taking a chance of running afoul of their regulators guidelines, have instead engaged in de-risking, by either cutting off relationships with regional banks or requiring them to meet stringent requirements. The impact is that investments to the region is slowed.
“[The US Treasury] says it wants to be risk sensitive, well, if it wants to be risk sensitive then it needs to focus on where the money is rather than creating rules that act as a proxy to money laundering or terrorism financing, and it has found the answer, even if fortuitously or scientifically this year … with the Russian sanctions,” she said as she appealed, “do not let this be recorded as an act of unconscious bias”
“Look at the list of countries who are listed and you will see they are all former colonies and people of colour,” the prime minister said.
Waters herself in her opening statement called the testimony “timely and historic”, adding that the hearing is aimed at crafting serious steps to end the deterioration of global financial access for the Caribbean.
“For too long the lack of financial access faced by Caribbean nations and their majority black populations has been blatantly ignored,” Waters said.
The US Congresswoman warned, “without action on this issue we risk ceding our leadership in this region to countries like China and Russia which have been working hard in recent years to become more active in the Caribbean. It’s clear that combating the loss of United States correspondent banking relationships in the Caribbean should be a mutual priority for both the the Caribbean and the United States.”
Patrick McHenry, the North Carolina Republican who has been the ranking member of the House Financial Services Committee since 2019, calling de-risking “a critical issue” urged his country “to step back” when it finds innocent people or legitimate businesses being shut off from financial services.
“Where do those debanked customers go? China?” he asked as he presented data which show that from 2009 to 2016, Chinese correspondent banking relationships grew from 65 to 2,246 as that country replaced “friendly nations” which make it difficult to move money around for legitimate purposes.
Mottley herself called for a level playing field in dealing with the matter as she outlined, “money launderers are hiding their money in plain sight but you are coming to us to give yourself a sense of comfort and that is our concern with these lists. Then secondly, when we comply with the list, what happens, the goal post is moved and a new list comes out with different concerns.”
The list she speaks of refers to the requirements banks must undergo to be deemed compliant including flagging transactions above US$10,000. She said in her country, in order to avoid breaching the rules, the bar for flagging transactions has been set at US$5,000 which makes it difficult to conduct traded.
“Our economies cannot function on their own. We do not produce enough clothes, we do not produce our own food, we do not produce our own equipment, and therefore unless we are able to trade with the rest of the world, we are at risk of becoming financial pariahs.”
The requirements also means that businesses and consumers find themselves spending “weeks and months just to open a bank account”.
“This is the most non-nonsensical thing we have seen in public policy,” Mottley argued. “Every citizen in the world should have a right to having a bank account.
“We have been making noise for near a decade and we want to thank this Committee for hearing us today because that noise cannot continue,” Mottley said, noting that ironically with the technological development these days.
Mottley reminded the legislators that following the invasion of Ukraine by Russia and the sanctions imposed on Moscow, it was soon discovered that most of the assets held by Russians were not in Caribbean banks, but in Europe and the United States.
“If you don’t use this example to show why this is an appropriate time to take different action, we will continue the injustice,” she said, adding “Russia did not choose the Caribbean to hide its money…they chose the metropolis, they chose London, New York, Switzerland, Luxembourg.
“And you only have to…follow the money…it hasn’t come to the Caribbean,” she told the legislators.
“There has to be a fundamental injustice in a system that puts on a list, not Luxembourg, not the United States, not the United Kingdom, but puts Jamaica, Trinidad and Tobago, Guyana, Barbados, all of which were put on a list, not even because we were having substantive money laundering there, but because in 2020, there was a determination to change the criteria by which we assess countries, looking at the definition for money supply from M2 to M3.
“If Treasury wants to fight crime, fight money laundering, then do not drive the transactions underground by forcing us to find alternative means to trade to send money to each other. Whether it is digital yuan, or whether it is the unregulated cryptocurrency, or whether it is buying jewellery, people will find ways to send remittances or find ways to continue to trade because we do not produce all that we need in order to live.”