As published on caymancompass.com, Wednesday 20 April, 2022.
Barbados Prime Minister Mia Mottley has criticised the international anti-money laundering regime as disproportionate for small developing countries given the small risk they represent compared to large developed nations where most of the actual money laundering is taking place.
Speaking at the Caribbean Financial Access Roundtable in Barbados on Wednesday, Mottley addressed a delegation of Financial Services Committee members of the United States Congress, CARICOM heads of state and government, as well as senior North American banking executives.
Mottley said Caribbean leaders were “unflinching” in their support of international efforts to stop crime, terrorism and their financing.
But she said Caribbean governments had always stressed that there should be a risk-based approach, rather than a one-size-fits-all that would place prohibitive burdens on small nations.
She noted the current system of anti-money laundering and countering the financing of terrorism was so “transparently flawed”, that it “ended up being counterproductive, inadvertently supporting crime”.
The Barbados premier said the countries that find themselves on the anti-money laundering lists issued by the Financial Action Task Force, the OECD or the European Union typically have very little international financial activity of any sort.
Yet the rich, developed countries where most international finance and money laundering takes place “have never been listed and will never be listed”.
Criminals could simply follow who does not appear on the list and choose the path of least resistance.
“We know that transactions are routed through Sydney, to London, Dublin, Toronto, to other countries in Europe, through New York and through some of the states regrettably in [the US], as well. We do not hear any of these centres being sanctioned, nor do they face the spectacle of enhanced due diligence,” she said. “The sanctioned countries are Haiti, Nauru, South Sudan, Senegal, Uganda, Jamaica, Barbados, Bahamas. I can go on.”
All these countries were asked to carry out the same level of regulation as large countries that have that capacity to distort global systems, leading to a flawed and discriminatory outcome.
Mottley pointed to weak beneficial ownership rules in the US and the UK as critical elements in money laundering.
“Yet we are having to restructure our laws and processes to ensure that all beneficial ownership is disclosed to everyone.”
Barbados is, like the Cayman Islands, on the FATF list of jurisdictions under enhanced monitoring because of perceived weaknesses in their AML regimes.
The effect of being listed, the Barbados prime minister said, is financial exclusion, as for banks the cost of enhanced due diligence is too high compared to the relative profitability of doing business with small developing nations.
And the reduced banking footprint and decline in correspondent banking in the region has a detrimental effect on trade, commerce and economic growth.
The current system makes it too easy for money launderers, Mottley suggested. “And if we doubted how easy it was for them, we only need to follow the trail of the confiscations taking place globally, as a result of the war in Ukraine, and where the properties are being confiscated, where the yachts are being confiscated.”
Maxine Waters, chairwoman of the US House Committee on Financial Services, said that for years she has been engaged with financial institutions, US agencies, multilateral development institutions and leaders from affected countries to address the issue of de-risking. This is the inclination of banks to terminate or restrict business relationships with certain clients or countries to avoid, rather than manage, risk.
“There have been improvements, especially as many of the Caribbean nations have enacted significant financial crimes compliance measures,” Waters said. “Yet despite these good faith efforts to reform, many Caribbean nations continue to face considerable challenges in accessing financial services.”
The financial services committee chairwoman said the complex issue could not be solved by the US Congress alone but would require “bold, cooperative action from all stakeholders” to reverse the damage caused by decades of de-risking and deteriorating financial access.
Cayman Islands Premier Wayne Panton participated in the roundtable that addressed de-risking and correspondent banking; the scope and impact of European Union listing initiatives; and actions to address the changing international standards to combat money laundering and terrorist financing.
“As a leading global financial services centre, with vast experience in navigating financial services issues, it is important for the Cayman Islands to be an integral part of these discussions with US Representatives and Heads of CARICOM,” Panton said in a press release.