A looming “catastrophe”. John Beale, until recently Barbados’ Ambassador in Washington, wasn’t wrong in describing what Barbados and its Caribbean neighbours are facing should Washington in general and the United States (US) Treasury Department in particular, get their way in their efforts to strangle if not cut off completely the correspondent banking relationships between Caribbean nations and US financial commercial institutions.
Tony Marshall, the Caribbean island-nation’s top diplomat at the United Nations (UN), used equally strong language to paint a potentially stark picture of what may be ahead for the island-nations and coastal states that dot the Caribbean Sea and the Atlantic Ocean.
“It is a potential serious disaster waiting to happen if it hasn’t already happened,” was the way Marshall put in a conversation with BARBADOS BUSINESS AUTHORITY in New York.
The two diplomatic representatives know what they are talking about when it comes to correspondent banking.
For one thing, both Beale and Marshall are former senior bankers in the Caribbean.
The first was a chief executive officer of a Caribbean indigenous bank in Bridgetown and the other ws a director (he has retired) of Barclays Bank in the Caribbean at a time when the British global behemoth was the linchpin of the region’s banking system.
As most governments see it, the Treasury Department wants to choke off funding to international or any homegrown terrorists seeking to carry out deadly acts on civilian and government targets in the US and Europe.
At the same time, Washington hopes to block drug money laundering in the region.
The trouble is that the Barack Obama administration has embraced what can be a financial minefield that if followed would inflict untold damage to the economies and everyday life of millions of people across the Caribbean, many of whom rely on remittances from relatives in the US to put food on their tables and a roof over their children’s heads.
At the same time, too, private companies which have firm business arrangements with US enterprises may be unable to meet their financial and other commitments because they can’t make payments.
“The trouble isn’t so much with the Canadian banks in the Caribbean that service the region and are international financial institutions.
“But it would be for the indigenous Caribbean banks which would be hard hit,” asserted Beale, whose tenure as Barbados’ Ambassador in Washington ended in June but who is to go to The Bahamas as the Organisation of American States’ representative there.
“The indigenous banks must have correspondent banking relationships to make payments. A country like Belize would be hard, extremely hard hit. But if the situation worsens, the entire region would be negatively affected eventually.”
An inability to make payments in the US, the Caribbean’s leading trading partner and a major source of tourists and remittances, would drag down economies if there are no correspondent banking ties.
“It’s a question of payments. For hotels, it would be a question of payments when guests use credit cards,” Beale explained.
“It’s really a very serious matter. We have been doing correspondent banking in Barbados for donkey years and there hasn’t been a problem. Now this.”
The US policy is perplexing for at least three reasons. First it’s a profitable relationship for both partners. Secondly, Barbados and most of the region aren’t terror targets. Next is that Barbados isn’t considered by international monitors to be a centre of money laundering.
Caribbean officials say the issue has arisen because of the mindset of a few senior Treasury Department executives who are prosecutors instead of being “holistic” decision-makers.
“We should be dealing with generalists not prosecutors in Washington who see terrorists and drug traffickers behind every palm tree,” was the way it was put.
Marshall, who has assumed a leading role in the Caribbean’s efforts at the UN to alert the international community to the potential impending dangers to banks suggested the damage so far hasn’t been significant.
“Very negligible,” he said. “Through our own efforts, we have been able to alert all of the key financial agencies to the fact that it can pose a serious disaster to the region.
“We have also been able to encourage many of our friends around the world – the Nordic countries, the Pacific states, the Canadians and others – with whom we have been able to speak and we have asked them to use every opportunity to speak out about it.
“It’s important that we sensitise the banking regulators to the extreme damage which can occur to the Caribbean if this matter is left in its current state.
“The region can’t stand still if correspondent banking is minimised or denied by the US.”
The danger to Barbados, which has been given more than a passing grade for security against terrorism and money laundering, is that it could suffer what Americans call “collateral damage” from Washington’s action, meaning that while the 50-year-old country is unlikely to suffer a serious direct strike it could be adversely affected by the fallout caused by events in neighbour countries.
That’s cold comfort for a place which is a major player in financial activity in the Eastern Caribbean.
What CARICOM states may be hoping for is that when a new administration takes over in Washington in January next year, the new decision-makers may be more receptive to the region’s plight than the present lot.
With Donald Trump, the Republican presidential nominee, threatening fire and brimstone if elected US president, the chances of an ease will be minimal at best. Hillary Clinton’s new team may be more receptive to the Caribbean’s pleas.
But that’s not a sure thing.