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Given the fact that de-risking is becoming an increasing concern, Minister within the Ministry of Finance Dr. Ubaldus Raymond has said that Saint Lucia and the rest of the Caribbean must find solutions to this problem.
Raymond said that the Caribbean will be hit hard by de-risking by banks in the United States.
“They are trying to protect themselves against money laundering and anti-terrorism financing and they want to ensure that monies that leave the borders of certain countries or regions are legitimate monies,” he explained.
The minister said this will have a negative impact on the local economy, particularly with trade.
“Because businesses here have to transact with the outside world and if you don’t have a corresponding bank it will make it very difficult for them to do business,” he explained.
Dr. Raymond alluded to the fact that some Caribbean countries are already experiencing some problems when it comes to this issue, noting that Saint Lucia too can be affected in the future.
Meanwhile, Prime Minister Allen Chastanet had said correspondent banking wasn’t targeted towards the Caribbean but was aimed at eliminating money laundering and imposing huge penalties.
However, he said no consideration was taken as to how that would have affected the Caribbean.
He said the impact is far reaching, as many Caribbean businesses and individuals are cut off from access to finance and it is difficult for new businesses to establish operations.
This was discussed at the CARICOM Heads of Government meeting held in Guyana this year and leaders have agreed to continue this dialogue in the coming months.
De-risking is international banks’ withdrawal from their relationships with home-grown banks because of fears of money laundering and questionable sources of funds which would cause the international banks to receive heavy fines from their regulators.
Regional banking institutions rely on such relationships in order to allow residents to conduct international financial transactions. The issue has been occupying the attention of regional policy-makers, following signals by international banks that they are unwilling to continue carrying the business of regional banks.
Transfers of remittances, cheque payments, international trade and the facilitation of credit card settlements for local clients are among the areas that have been affected by de-risking.
The Caribbean Development Bank (CDB) quoted a November 2015 World Bank survey as saying that about 75 percent of international banks have experienced a reduction in correspondent banking services, with the Caribbean being the worst affected.