The U.S. Corresponding Banks rightfully do not want to deal with the Caribbean

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by Jolly Green

Between money laundering and financing terrorism Saint Vincent and the Grenadines after continually attracting global attention have helped to bring about losing the U.S. correspondent accounts for not just themselves but the whole Caribbean in an action called de-risking.

At least nine Caribbean banks that have lost access to U.S. correspondent accounts as a result of “de-risking” now access U.S. dollars indirectly, usually at higher costs, through their ties to the U.K. and other overseas financial institutions.

When a US bank passes a transaction through their system which is unknowingly linked to money laundering or the financing of terrorism, if discovered the US bank will feel the wrath of the US authorities with massive fines being imposed. That is the risk they run with dealing with Caribbean banks. Caribbean banks simply cannot be trusted with the golden rules of know your customer or the attention to proper compliance.

Years after first drawing global attention, de-risking, which involves the termination of certain accounts by global lenders to mitigate exposure to legal and regulatory penalties and thus reduce compliance costs, still impacts the Caribbean financial services industry.

As a result, Crown Agents Bank, a U.K.-headquartered financial intermediary, now handles U.S. dollar-clearing tasks for several of the affected lenders through its access to U.S. correspondents.

Data administered by the Society for Worldwide Interbank Financial Telecommunication shows a 15 percent decline from 2011 through 2016 in the number of correspondent banks around the world that process Dollars or Euros. In 2016 alone, Caribbean jurisdictions and small Pacific states experienced the highest rates of decline, at about a 10 percent loss.

But the crunch in the Caribbean became real in 2016 when a story appeared about a Saint Vincent and the Grenadines-registered offshore bank that passed money through the commercial system. The money was Venezuelan government money sent to the left wing Spanish political party ‘Podemos’ a left-wing Populist Party that claims it seeks to address the problems of inequality, unemployment and economic malaise that followed in the wake of the European debt crisis.

An interesting in-depth article about this matter can be found at:

Within a few months of Mr. Binose writing the article, the bank in question had left SVG and relocated to Puerto Rico. I am not sure if they actually relocated or if they simply started up a new bank because although the bank still has some Vincentian employees listed, it has a different name and is in a different domain. Perhaps some of the records died with the old bank in SVG; if this is a new bank, there is little the authorities in the new domain can do by way of inspecting records of the old.

Why President Maduro of Venezuela was sending money to Spain for this article is not important. What is important is that it helped wreck the correspondent banking system in the Caribbean.

Today, nine of 53 members of the Caribbean Association of Banks, or CAB, a St. Lucia-based industry group that mostly represent smaller lenders in the region, still do not have a U.S. correspondent account, whereas before de-risking began, all members held at least one.

All nine have since on-boarded as clients with the British, Crown Agents Bank, which holds direct relationships with U.S. correspondent institutions

Of course, it was not just this SVG incident that brought about this crisis, which is costing banks and their client’s substantial increased costs’. There were other incidents that were internationally reported and recorded.

The following matter saw the whistle-blower suspended from her Saint Vincent job at NCB Bank. A worker at the National Commercial Bank (NCB) was suspended for allegedly breaching the institution’s confidentiality rules. According to a statement by Prime Minister and Minister of Finance, Dr. Ralph Gonsalves who said “We have someone at the bank whom I’ve been advised has been suspended. They disclosed confidential information,” Gonsalves, said at a press conference. According to Gonsalves, someone supplied Opposition Leader Arnhim Eustace with sensitive information relating to transactions at the NCB Bank.

What eventually happened to the lady I have no idea, but usually, in such matters, the accused is given a raise and a superior position to keep them quiet? But what happened, in this case, I do not know. Following now is the record of events.

On November 2009, Eustace charged that US $1 million had been deposited in an account at the NCB, and called on Gonsalves to answer several questions relating to the deposit. It did not appear to be the following million because of the outcome of the following million.

In 2009 a member of Saint Vincent and the Grenadines government, a minister, took an old bag into a bank that contained a million US dollars in cash, dollar bills of various denominations. The Minister of Finance at that time was Dr. Ralph E Gonsalves who was and still is the islands Prime Minister. The bag man left the bag of dollars at the bank and told them to change the contents into EC dollars, cash. The bank was the NCB Bank which was owned by the Government and came under the watchful eye of the Minister of Finance, who was and still is the Prime Minister.

The bank called up the bag man later that day and said they were unwilling to change the US money into EC Dollars, come and collect the bag of cash. Sorry, I forgot to tell you the bag man is better known to Vincentians as Julian Francis, first cousin of Dr. Ralph Gonsalves, the Minister of Finance and Prime Minister. Well, we must assume the bag man collected the dollars because within a few days all the family, friends and ULP colleagues of Dr. Ralph E Gonsalves Minister of Finance and Prime Minister were lined up in banks with fistfuls of US dollars requiring them to be exchanged for EC Dollars. This is not new news, it has been reported many times since happening.

What is strange, none of these actions were reported to the police as would happen if you the reader went into a bank with extremely large sums of US dollars to change. The bank was also obliged to report such matters and behavior to the Financial Action Task Force [FATF] in Saint Vincent who came under auspices of Supervisory, and Regulatory Division (SRD) of the Ministry of Finance and final control of that department is the Minister of Finance and Prime Minister Dr. Ralph E Gonsalves.

There is a ‘Financial Intelligence Unit’ FIU in SVG which is well established and operational, with sufficient legal authority and highly motivated and professional staff. It is the primary AML/CFT institution in SVG and is constituted as a hybrid administrative/law enforcement FIU reporting to the Minister of Finance. So what went wrong on this occasion? Why did they not act and take action in this matter? We know that most of the leading ULP hierarchy and the Minister of Finances family and Cousin Julian were in the mix, but why did both FATF and FIU fail to act?

The IMF wrote in a report in 2010 ‘There is good cooperation between the FIU, law enforcement authorities, and the Attorney General (AG). The FIU staff conducts joint operations and investigations with the police and customs authorities and regularly applies to the court for production orders in coordination with the DPP. This has helped to develop prosecutions of ML cases. Cooperation arrangements could nonetheless be enhanced through a more formal framework between the FIU and domestic law enforcement authorities. The AML/CFT expertise within the police and customs force could also be enhanced, and all agencies involved in AML/CFT could benefit from more advanced training, especially for complex ML and FT cases. Both the DPP and the AG’s office are under-resourced to conduct complex ML prosecutions, especially those with international dimensions.  

I wish I could have advised the IMF at the time of how everyone mentioned in their report was in some way or other more than just associated with the Minister of Finance and Prime Minister Ralph E Gonsalves. They are his people he owns them; they are his collection of Barbie’s.

2008, Panama: The Stolen Panama papers also give an insight into offshore activity by SVG and others.

There are legitimate uses for offshore companies and trusts. I do not intend to suggest or imply that people, companies, or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly.

2015: An employee in the Swiss Branch of HSBC stole records and made them public through the authorities and others. It came to light via those records as follows in yet another Binose report. But this time it involved 16 bank accounts at HSBC in Switzerland amounting to US$48.7 million.

LETTER: HSBC IN SWITZERLAND – NAMING NAMESMaintaining a Swiss bank account isn’t illegal and doesn’t necessarily…

Posted by BreadFruit News on Tuesday, February 17, 2015

2015, St Vincent: A document purporting to show Prime Minister Dr. Ralph Gonsalves as the holder of a Swiss HSBC account with US$19 million was circulating. Gonsalves denounced the document as false. A statement was made by the ULP via a press release and the ULP party website on Dec. 6, 2015 at 12:38 p.m.:

“The Prime Minister of St. Vincent & the Grenadines, the Hon. Ralph E. Gonsalves, has instructed the Office of the Attorney General to immediately contact the Government of the United States of America under the Mutual Legal Assistance Treaty to investigate a fraudulent bank document with an alleged bank account domiciled to an address in Brooklyn, NY USA”.

“He has further instructed the Commissioner of Police to open a criminal investigation into the fraudulent document locally, which includes any regional or international operatives currently working in St. Vincent & the Grenadines, as well as to immediately contact INTERPOL, the Regional Security System and the Joint Regional Intelligence Fusion Centre of IMPACS to assist in the investigation. He has also instructed the Commissioner of Police to alert the Director of Public Prosecution of these investigations.”

Since that matter surfaced not a word about the outcome of the investigation or any evidence an investigation took place.

If you don’t read all the online stories and the comments to them you will never be wiser to the facts.

Jolly Green

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