Across the Caribbean Region, in Latin America, and in many other small states around the world, the banking relationship of remittance service providers are being restricted; or, in some cases, terminated. This multi-national commercial banking stance is, therefore, having a negative impact on the welfare of thousands of families in our region, and globally.
Last year, Jamaicans, received slightly more than US$2 billion in remittances locally, which represented some 17 percent of the country’s Gross Domestic Product, according to the Bank of Jamaica records; and, those inflows enabled many local households to maintain sustainable lifestyles.
While it is accepted that the threat to remittance service providers is based on regulations imposed on the global financial system, to tackle money laundering and terrorism, the fact is: their response, via de-risking, is undermining the bona fides of the remittance industry, which continues to improve its compliance levels. As a result, there is increased regulatory burden on remittance companies, such as compliance and transaction costs.
In fact, some international commercial banks have responded by simply cutting their relationships with local banks, which facilitate remittance services. And, faced with increased compliance costs, these banks discontinue business with countries where they perceive that the risks are not warranted.
This cutback in banking relations does not only affect remittance services; but, it is also impacting the processing of transactions in respect of: cash, cheques, and money orders; as well as, credit and debit cards transaction from one bank, on behalf of another. Given all of these concerns, we are in agreement with the Hon. Owen Arthur, Former Prime Minister of Barbados, who in his presentation at the Round table Discussion on Correspondent Banking, held by The Caribbean Policy Research Institute at the Jamaica Pegasus Hotel on January 19, described this threat as, being “Potentially one of the most devastating to the stable and successful development of the Caribbean Region.” And, we also concur with his conclusion that, “A united approach, in the Caribbean, is needed to tackle this banking de-risking challenge, which is impacting the remittance industry.”