Barrow Left Washington with Little More Than Tea and Sympathy, Says The Fiscal Times

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Updated: July 12, 2016

The woes of correspondent banking continue to plague the Caribbean countries despite several efforts and meetings held to see how best the challenges can be mitigated.  When the Caribbean Community met in February in Belize, a special financial task force was put together to see how best the issue can be addressed.  Five months later, the community met again in Georgetown, Guyana with the issue of correspondent banking being tabled again.  Foreign Minister, Wilfred Elrington attended these recent meetings; he spoke to Love News on the discussions had.

WILFRED ELRINGTON

“Progress has not been spectacular but we have been trying. It’s a very difficult situation because what is really needed is for a change in the laws in the United States and to do that you have to have the United States Congress to get involved but you know the congress has been deadlocked on most things. We took the decision to try to see if we can do more political work, get our citizens abroad to intervene with the congress people in the United States to see whether we can get them to move on it. It’s going to be a difficult thing to do especially given the election season but we can’t give up, we’ve got to be persistent.”

Eyes from all around the world are looking at how the de-risking movement by the American banks is affecting businesses globally.  Just yesterday, the Reuters News Agency did a news piece on the correspondent banking with a focus on Belize.  Here is that news package.

The Fiscal Times online publication penned a similar article dated July 12, 2016.  The lengthy article speaks of the challenges being faced by investors to Belize and Belizeans living abroad who send monies to Belize regularly.  It reads, in part, quote, “This so-called “de-risking” or “de-banking,” in which banks pull out of certain lines of business and even parts of the world, has intensified. Enhanced scrutiny on financial fraud and new regulations to stem money laundering and terror finance are all at play.  Yet the de-risking movement has triggered a collision of interests: As banks tighten controls, small, poor countries most dependent on trade say they’re being unfairly cut off from global finance, a case made by Barrow.  “The regulators all agreed that absent a solution, our economies, our societies would go belly up,” he recounted in a speech in February. But in the end, his group left Washington with little more than “tea and sympathy.”  Just two banks in Belize maintain “correspondent banking relationships” with U.S. banks, Atlantic Bank and Scotiabank, each of which have international affiliations. Such bilateral links allow banks to finance trade, settle credit card payments and clear the U.S. dollar-denominated transactions that underpin global commerce.  De-risking threatens the fragile economy of Belize, a country the size of New Jersey with a population of 375,000, a 40 percent poverty rate and an economy based on farming and tourism. Businesses now must set aside weeks to make routine payments to suppliers abroad that used to take moments. Desperate to pass muster with American banks, Belizean banks have dropped customers carrying potential risks, including cash remittance services used by many people working abroad.  Every day, Belizeans struggle to surmount trade barriers.  In south Belize City on a June weekday, Yvonne Williams visited a Western Union agent, tucked inside a Chinese-owned grocery, with her two granddaughters. The nursing assistant lives near Boston and is building a home in Belize for her retirement.  It is becoming harder to send money to Belize, Williams said. She tried to send $700 from the United States to Belize about three months ago for construction on her home, but the transaction was delayed, and she couldn’t pay her workers. She believes the size of the transfer attracted attention. Santander Group, a Guatemalan company with a major investment in Belize, has had trouble bringing cash in and out of the country and closing financing from international banks for its sugar mill, which employs around 700, said director Edgar Hernandez.  “Ten banks have been willing to lend us money, but not us in Belize,” Hernandez said. “We are exporting everything that we produce, so every time you have commercial activity and you don’t necessarily have the proper network banking-wise to channel those funds, that creates transactional costs.”  What’s happening in the Caribbean is part of a larger saga, in which tighter banking controls are prompting the world’s top financial institutions to avoid not just known terrorist groups but also cash remittance services, charities, foreign embassies, and other classes of customers, many of whom have no role in criminal activity. That conflict threatens global goals of providing financial access to the world’s poor. Caribbean countries are vulnerable because they depend on foreign trade to survive. Belize’s currency is pegged to the U.S. dollar, and the United States is its most important trading partner.  It is too soon to trace broad economic impact to lost banking ties. In 2015, for instance, Belize received $82.4 million in remittances, compared to $78 million the previous year, according to the central bank.  Yet evidence exists de-risking is driving business to a hidden world of cash transactions that will make it harder for regulators and law enforcement to track money flows.  One Belize businessman, who declined to be named, said in order to pay a loan in Belize, he must travel to another Caribbean country to withdraw U.S. dollars and carry the cash back to Belize. “I do that every month,” he said. “I can’t send a wire from my bank to my loan account in Belize.”  End of quote.  Tomorrow we will have more on the recent research done by the Fiscal Times on correspondent banking and the ramifications in Belize and the Caribbean, in general.