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Correspondent Banking problem being fixed Print E-mail
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Written by By Shane D. Williams   
Thursday, 04 February 2016 00:00

Financial imperialism is when large developed countries dominate developing (weaker) countries by pushing international policies or issuing private directives that steer the flow of international trade/wealth in their favour. This has been done in the past by implementing trade embargos or restrictions, currency control and uneven trade policies. Many learned people in the Caribbean region believe that the United States’ strict regulations in the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) campaign is simply another method used by the super power to exercise economic sovereignty over the West. Belize has set up a plan to prevent economic Armageddon in the wake of Bank of America’s termination of correspondent banking relationship with Belize Bank and other similar developments in the sector.

Prime Minister Dean Barrow; Financial Secretary, Joseph Waight; Governor of the Central Bank, Glen Yssaguirre; and Economic Ambassador, Mark Espat; were joined in the United States by Belize’s Ambassador Pat Andrews on a mission to hold meetings with several financial regulatory agencies from January 25 to January 29. The goals of the mission were simple: one, to get a clear understanding of the federal government’s position on the large banks’ termination of relationships with Belizean banks, and two, to get an understanding of how the federal government’s regulations have influenced the decisions of those large banks.

The team returned to Belize on Sunday, January 31, and Prime Minister Barrow briefed the nation on his accomplishments from those meetings on Monday, February 1. He first explained the importance of correspondent banking relations to the economy. “All trade relations presuppose the ability of our importers and exporters to send money to the States to pay for goods and receive money from the states for their goods,” said PM Barrow. At the kitchen table level, a large number of Belizeans rely on correspondent relations for remittances from loved ones in the United States. PM Barrow said, “It was important for us to go on this mission because a number of our banks have lost some correspondent banking relationship and there are indications that this might continue happening.”

While in the United States, the team met with the Office of the Comptroller of Currency which regulates banks under the federal system and the Federal Deposit Insurance Corporation which monitors state banks. The team also had the opportunity to have a meeting with the Secretary of the Treasury, Jacob Lew. On the issue of the regulators’ influence on the bank’s decision to terminate correspondence, Prime Minister Barrow was told, “Don’t let any bank tell you that it is because of the pressure that we are putting them under.” The regulators assured the team that they are satisfied with Belize’s efforts to improve its Anti-Money Laundering and Combating the Financing of Terrorism Framework and it appears that the banks are using the regulators as scapegoats. The regulators then made assurances that they will do more to disseminate information on Belize’s efforts to meet regulation standards so that banks the country is interested in can know it is safe to engage.

The regulators’ stamp of approval was welcomed but they cannot be given a pass. While they did not instruct or warn the large banks to cut ties with Belize, the regulatory burden to maintain such a relationship made the risk of doing business far heavier than the reward. Prime Minister Barrow painted it this way: “Why if I can make a million dollars doing business with you I would take the risk of paying a billion dollars in fines if something goes wrong?” Something going wrong is a transaction seeping through from a client in Belize that can later be traced back to a suspected tainted individual or group. Tainted individuals like those on the United States’ Terror Watch List slip pass Homeland Security and other federal agencies often, as is always discovered after an attack, and they have the greatest monitoring capabilities. Therefore, it is not that difficult for transactions to be passed through for tainted individuals which could result in heavy penalties for the U.S. banks.

The decision to terminate correspondent relations was simply a financial one. Transactions netted U.S. banks only a little more than six million dollars in 2014. That is not even a drip in the bucket for large institutions like Bank of America. It is for this reason that the Government of Belize has decided to target smaller banks for correspondent relations. Prime Minister Barrow said in his briefing on Monday, “We have learnt that it may be better to go after the smaller banks who can handle the load just as well as the top banks.” This decision was foreshadowed before the team left on the mission when he said that for small banks “it would rather make more economic sense to do business with Belize since they are not so big as to be able to simply turn up their nose at business in Belize and decide that it’s not worth it because of the regulatory burden.”  

The banks being targeted for correspondent relationships are tier two banks. This courtship is being handled as a matter of great urgency. Prime Minister Barrow took the opportunity on Monday to point out once again that there is currently not a single bank in Belize without any form of international correspondence.