For­mer Fi­nance Min­is­ter KAREN NUNEZ-TESHEIRA and now a can­di­date for po­lit­i­cal leader of the rul­ing Peo­ple’s Na­tion­al Move­ment, was in­vit­ed to de­liv­er an ad­dress on Oc­to­ber 12, at the Rus­sell Sen­ate Of­fice Build­ing, Wash­ing­ton DC at the IMF/ World Bank Fall meet­ings.

The par­tic­i­pants and stake­hold­ers were from the African and Caribbean ju­ris­dic­tions who op­er­ate ei­ther as rep­re­sen­ta­tive of pri­vate sec­tor or gov­ern­ment in­ter­ests.

Speak­ing at this fo­rum is strict­ly by in­vi­ta­tion, which in­volved se­lect­ed speak­ers from the African and Caribbean re­gions.

Her speech, which we car­ry in full, fo­cused on the im­pact of the de-risk­ing of re­gion­al banks and its im­pact on lo­cal in­vest­ment.

Many banks in the Caribbean are deal­ing with the is­sue of de-risk­ing which leads to high­er costs of do­ing busi­ness for or­di­nary cit­i­zens.

It is an ho­n­our to be here, ad­dress­ing this au­gust fo­rum on one of the most crit­i­cal top­ics im­pact­ing trade and, more im­por­tant­ly, eco­nom­ic de­vel­op­ment with­in the Cari­com re­gion.

In part, my for­mer po­si­tion as min­is­ter of fi­nance in the gov­ern­ment of T&T from 2007 to 2010 has ig­nit­ed my ob­jec­tive this morn­ing—that of ad­dress­ing the top­ic of de-risk­ing by in­ter­na­tion­al cor­re­spon­dent banks and its im­pact on For­eign Di­rect In­vest­ment (FDI) for the Cari­com re­gion and T&T in par­tic­u­lar.

Over time, the pri­ma­ry fo­cus on the im­pact of de-risk­ing in the Caribbean, and prop­er­ly so, has con­cen­trat­ed main­ly on the hu­man toll on small, frag­ile, vul­ner­a­ble economies such as ours—economies that are si­mul­ta­ne­ous­ly bat­tling glob­al cli­mate change and the strain it places on the tourism sec­tor, di­rect­ly af­fect­ing the liveli­hoods of many. And in the case of T&T, the volatil­i­ty of the price of oil and gas, the main­stay of our econ­o­my.

A 2015 World Bank sur­vey con­clud­ed that the Caribbean was one of the re­gions most im­pact­ed by the loss of Cor­re­spon­dent Bank­ing Re­la­tion­ships (CBR).

This loss was main­ly due to de-risk­ing as­sum­ing high-pri­or­i­ty con­sid­er­a­tion fol­low­ing the 2008 glob­al fi­nan­cial cri­sis.

Re­search has shown that ef­fi­cient and com­pet­i­tive for­eign fi­nan­cial flows bol­ster eco­nom­ic growth and bring ad­di­tion­al peo­ple in­to the fi­nan­cial sys­tem in a for­mal and trans­par­ent man­ner. Job cre­ation, tech­nol­o­gy trans­fer and long-term cap­i­tal move­ment are just a few ways economies in the Caribbean ben­e­fit be­cause of FDI.

How­ev­er in re­assess­ing its cost /ben­e­fit risk ex­po­sure, the cor­re­spon­dent in­ter­na­tion­al bank­ing sys­tem has be­come in­creas­ing­ly sen­si­tive to rep­u­ta­tion­al risks and the im­po­si­tion of sig­nif­i­cant fines for non-com­pli­ance with cor­re­spon­dent-re­lat­ed bank­ing reg­u­la­tions in­clud­ing the US bank se­cre­cy laws and an­ti-mon­ey laun­der­ing leg­is­la­tion.

Cor­re­spon­dent bank trans­ac­tions such as mon­ey trans­fers through wire trans­fers, check clear­ing, cur­ren­cy ex­change, cred­it card trans­ac­tions and in­ter­na­tion­al trade of goods and ser­vices are now be­ing placed at in­creas­ing risk for the lo­cal re­spon­dent bank­ing sec­tor.

Ac­cord­ing to the 2016 UN Eclac­study, the in­tro­duc­tion of the Know Your Cus­tomer re­quire­ment has played no small part in in­ter­na­tion­al banks as­sess­ing the risk-ben­e­fit of do­ing busi­ness with our lo­cal banks, which ap­pears to in­creas­ing­ly dom­i­nate the Cari­com land­scape.

At the same time, in­ter­na­tion­al banks are mov­ing out or re­duc­ing their pres­ence in the re­gion.

One of the main ra­tio­nales for the in­crease in reg­u­la­tions and mon­i­tor­ing with its as­so­ci­at­ed costs has been cen­tred-around tax eva­sion, mon­ey laun­der­ing and fi­nanc­ing of ter­ror­ism and the weak com­pli­ance and im­ple­men­ta­tion of the AML laws in many coun­tries with­in the re­gion.

This is of par­tic­u­lar con­cern to our re­gion, as we re­main large­ly de­pen­dent on in­ter­na­tion­al trade and FDI. There­fore, the loss of CBRs, a di­rect re­sult of de-risk­ing, rep­re­sents a re­al and present threat to our economies—po­ten­tial­ly cre­at­ing sig­nif­i­cant bar­ri­ers to in­vest­ment in­flows and hin­der­ing the repa­tri­a­tion of rein­vest­ed earn­ings, crit­i­cal as­sur­ances for any for­eign di­rect in­vestor.

Ac­cord­ing to a 2018 UN Eclac study, de-risk­ing pos­es a re­al threat to for­eign di­rect in­vest­ment, whether in de­vel­op­ing Ex­port Free Zones and oth­er ini­tia­tives from rep­utable and in­ter­na­tion­al­ly recog­nised in­sti­tu­tions for whom the main dri­vers in­clude trans­paren­cy and ac­count­abil­i­ty, not sole­ly prof­it.

In 2017, a T&T Cen­tral Bank pre­sen­ta­tion not­ed that the pri­vate mem­bers’ clubs that op­er­ate as un­reg­u­lat­ed casi­nos are be­com­ing un­banked due to the clo­sure of sev­er­al bank ac­counts from 2014 to 2015. To date, T&T re­mains on the EU black­list.

So for small, vul­ner­a­ble economies such as ours, the rel­a­tive­ly small num­ber of banks and their dom­i­nance in our economies has had a para­dox­i­cal im­pact—cre­at­ing ex­pan­sion op­por­tu­ni­ties but in­creas­ing the risk of los­ing cor­re­spon­dent bank­ing ser­vices.

De-risk­ing has now tak­en cen­tre stage. It threat­ens our economies’ sus­tain­able so­cio-eco­nom­ic de­vel­op­ment and abil­i­ty to at­tract for­eign di­rect in­vest­ment op­por­tu­ni­ties. Iron­i­cal­ly, it fa­cil­i­tates the very threat de-risk­ing is in­tend­ed to mit­i­gate -dri­ving fi­nan­cial trans­ac­tions in­to the un­reg­u­lat­ed, shad­owy un­der­ground econ­o­my.

Our an­ti-mon­ey laun­der­ing laws in­tend­ed to ad­dress the plague of mon­ey laun­der­ing and its as­so­ci­at­ed il­le­gal ac­tiv­i­ties have sim­ply been in­ef­fec­tive Who of any sig­nif­i­cance in this shad­owy un­der­world has been ar­rest­ed?

To what ex­tent has crime and crim­i­nal­i­ty been abat­ed and the per­cep­tion of cor­rup­tion re­duced? And more re­cent­ly, our coun­try’s in­volve­ment in hu­man traf­fick­ing? Judg­ing by the re­sults, our re­al is­sue is the en­force­ment of the law.

I take no plea­sure in mak­ing these dis­clo­sures. Still, if not con­front­ed and ad­dressed, FDI op­por­tu­ni­ties will con­tin­ue to by­pass T&T, fur­ther­ing a neg­a­tive trend that has been in ev­i­dence for many years- af­fect­ing our abil­i­ty to cre­ate high val­ue jobs, in­crease mean­ing­ful glob­al ex­ports, ex­pand our econ­o­my and de­vel­op our peo­ple. This is par­tic­u­lar­ly rel­e­vant to com­pli­ance with AML/CFT frame­work leg­is­la­tion and reg­u­la­tions. The ques­tion is: how can T&T tran­si­tion with­out sound gov­er­nance?

Look­ing out at the mem­bers of this fo­rum this morn­ing, I be­lieve there is a shared pas­sion for max­imis­ing the pos­i­tive re­la­tion­ship be­tween the USA and T&T and our re­gion­al part­ners to work in uni­son with the US gov­ern­ment to­wards achiev­ing a shared vi­sion of in­creased eco­nom­ic sta­bil­i­ty, fi­nan­cial eq­ui­ty and na­tion­al se­cu­ri­ty.

Fi­nal­ly, I give you the un­der­tak­ing to work as­sid­u­ous­ly with the USA gov­ern­ment to­wards min­imis­ing, if not eras­ing, the threat de-risk­ing pos­es to FDI--to rein­vig­o­rate our peo­ple’s as­pi­ra­tions, for if we do not, these as­pi­ra­tions will re­main just that - -nev­er to be­come the re­al­i­ty to which our cit­i­zens should not be un­nec­es­sar­i­ly and un­rea­son­ably de­prived.