SPEAKING to the US House of Representatives’ Committee on Financial Services on Wednesday, Barbados Prime Minister Mia Mottley minced few words when she pointed out that continued de-risking of Caribbean banks would only create the parallel economy that financial monitoring was designed to limit.
The hearing followed a meeting held in Barbados on these issues in April that included Ms Mottley, PM Rowley, US Senator Chris Dodd, and US Congresswoman Maxine Waters, who is chair of the committee.
That happened because of running conversations on the matter in progress with Ms Waters since 2019.
Ms Mottley made is clear to the US that Caribbean banks were working hard, despite the challenges of correspondent-bank skittishness, pointing out bluntly, “Like women, we are doing twice as much as you to be considered half as much as you.” Despite a decade of working to align banking operations with the requirements of the Financial Action Task Force, the region has experienced a 30 per cent loss in correspondent banking relationships through increased cost of compliance and regulation of financial industries.
Correspondent banks are international financial institutions doing business with local banks, and they have their own guidelines and reporting responsibilities. When those requirements cannot be met by their banking partners, the resulting risk is limited by either a slowing or severing the financial relationship. Trinidad and Tobago is a signatory to international tax conventions created to limit the funding of terrorism and money laundering.
But this country was slow to implement necessary amendments to the Income Tax Act because of running wrangles in Parliament and legitimate privacy issues that needed to be addressed. While that was happening, local banks began to experience difficulties with transactions.
The US Inland Revenue Service has also been under pressure to deliver results on its costly implementation of a foreign-income reporting regime, FATCA, which requires the co-operation of country banks to identify US citizens for tax purposes. In 2017, Caricom protested the blacklisting of regional banks by the European Union, which had labelled them non-co-operative tax jurisdictions.
Four years later, TT was still “progressing” to being removed from that list in the face of increased processing fees and outright difficulty with transactions with banks in the EU.
Ms Mottley called on the US House to consider what the implementation of these restrictions and their timelines were actually doing, warning that countries would simply find other means of moving money, putting their international status at further risk and neutering the value of traditional financial reporting channels.
Clearly, TT and the wider Caribbean must do more to abide by increasingly stringent international requirements for financial tracking and accountability to be able to participate fluently in the global economy.