De-risking is a regional problem – Finance Minister

Georgetown, GINA, July 16, 2016

The issue of a correspondent bank pulling out of Guyana is not peculiar to this country, rather to the entire Caribbean and some Central American countries, Minister of Finance, Winston Jordan said.

“The correspondent bank doesn’t want to take the chance of dealing with banks in the Caribbean generally, by the way not only Guyana. In fact, the first country to complain about this de-risking, I think it was Belize, which, since last year had complained that their correspondent banks had started to leave because they didn’t want to be involved anymore with accounts in these countries,” the Minister explained.

De-risking is viewed as a mechanism by international financial institutions to protect their financial systems from possible threats posed by money laundering and terrorist financing, however, its effect on smaller territories has proven troublesome.

De-risking was an agenda item on the recently concluded CARICOM Heads of Government Conference held in Guyana from July 4- 6, 2016.

Governor of the Bank of Guyana, Dr. Gobind Ganga recently informed the nation that the Bank of America was severing relations with the local banking industry for which it has been a correspondent bank.

The Finance Minister indicated that the Bank of America’s withdrawal is in keeping with the implementation of the Foreign Account Tax Compliance Act (FATCA)

FATCA is what the US calls an extraterritorial law to cover their citizens and residents who have accounts abroad. Guyana had earlier amended its tax laws to allow for the exchange of tax information relating to citizens of the United States (US) with bank accounts locally, between the US and Guyana.

“Well it’s called de-risking in which banks in the US are avoiding the risk associated particularly dealing with small countries as it relates to the implementation of the Foreign Account Tax Compliance Act and of course the anti-money laundering legislation that requires a whole host of measures to be implemented,” Minister Jordan explained.

Meanwhile the Finance Minister also identified countries of the Organisation of Eastern Caribbean States (OECS), Jamaica and Central America as being affected by the withdrawal of the correspondent banks.

“Even Panama which has one of the strongest anti-money laundering systems had complained about de-risking activities,” the Minister told the Government Information Agency (GINA).

Additionally, a Regional task force was established by CARICOM to engage the US authorities on the consequences of de-risking activities for the Caribbean as it relates to remittances and trade investment.

“(In) January or February, CARICOM established a task force which was headed by the Prime Minister of Antigua and Barbuda and went to make representation in the US.” Some reports were made to CARICOM, Minister Jordan said.