A forum with government and private sector representatives from around the region last week called for a Caribbean-wide effort to deal with U.S. banks “de-risking” and pulling out of doing business with cash transfer companies and other financial institutions around the region.
The process of de-risking for banks is meant to ensure financial institutions are not used to help launder money or finance terrorism, but the heightened regulations and higher costs associated with ensuring transactions aren’t used for nefarious purposes means many major banks have pulled out of offering services such as cash transfers.
Former Prime Minister of Barbados Owen Arthur said in a prepared speech at last week’s forum, “Unaddressed, the de-risking that is at the center of the correspondent banking issue could serve to de-link Caribbean economies from access to global finance.
“It can also increase the cost of access to such finance, or force economic agents in the region to resort to illicit means, further damaging the image of the region,” Mr. Arthur said. “It can also do untold damage to the financial sector in the Caribbean.”
The Cayman Islands experienced many of those consequences last year when the only two banks that offered services to cash transfer companies closed the accounts. First, Fidelity Bank closed the Western Union branches on the island, and then Jamaica National and MoneyGram lost their accounts with Cayman National Bank.
The banks cited higher costs to comply with international regulations and the possibility of losing their own access to the global financial system if they continued to offer services for cash transfers.
Western Union is back up and running through a new company, GraceKennedy Money Services, and a deal with Scotiabank to provide banking services. Western Union had to close up its operations for four months when Fidelity Group closed its branches in July.
Cayman National Bank closed the accounts for JN Money Services, MoneyGram and the other remaining cash-transfer companies in Cayman, but they were able to stay open by accepting only U.S. cash, which was flown off island to be deposited. JN and its affiliates are now accepting Cayman dollars but still do not have a local bank account to convert local currency to U.S. cash, to then send it into the global financial system.
JN spokesman Gareth Manning said Tuesday that there was no update on the company’s negotiations with the Cayman Islands Monetary Authority to covert local currency to U.S. cash.
JN Money Services General Manager Leesa Kow, said in a recent press statement, “The reality is that money transfer companies and operators are more heavily regulated and scrutinized than banks although they adhere to the same regulations and rules as banks.”
In 2014, workers in Cayman sent almost US$180 million overseas to support their families; about $110 million of that went to Jamaica. Data for remittances from the past year is not yet available.
Many at last week’s forum called for governments across the Caribbean to coordinate their approaches to the international banking system and regulators.
Damien King, co-executive director of the Caribbean Policy Institute, said in a press statement, “What we have is many jurisdictions at many levels that overlap and are not consistent, and then international banks responding to that by setting up their own rules and decisions.” He said Caribbean governments need standards and uniform policies for banking and compliance.
Forum organizers said they invited Cayman Islands Financial Services Minister Wayne Panton, but he was unable to attend. Mr. Panton did not respond to requests for comment by press time Tuesday.