Panton talks de-risking with US lawmakers

| 22/11/2016 | 0 Comments
CNS Business

Wayne Panton, Minister of Financial Services, Commerce and Environment

(CNS Business): Financial Service Minister Wayne Panton is continuing to talk with US lawmakers about how the move by American banks to drop money service business clients is impacting the Caribbean region and is seeking a way to address the problem. The banks’ efforts to comply with more stringent guidelines regarding money laundering has seen many of them eliminate risk altogether and this ‘de-risking’ has had a detrimental unintended consequence on money transfer companies and the ability of ex-pat workers to send money home.

Despite the impending change of administration in the US, Panton visited with key US lawmakers, regulators and stakeholders in September that are likely to remain in post, regardless of the election result, to talk about the de-risking problem, not just for Cayman but for the wider Caribbean.

“Our issues with local money services businesses (MSBs), which Cayman’s government and the private sector worked together last year to resolve, were linked to de-risking,” Panton explained. “And this issue didn’t just affect persons who send remittances from Cayman to their families and friends in their home countries; it affected banking services across the board, for all of us.”

He said representatives from his ministry and the Cayman Islands Monetary Authority were planning another visit
in the coming months to continue discussions and find a way to address the unintended consequences of de-risking on the cash transfer business.

“As we told our experiences, we were particularly heartened to learn that the lawmakers we met, some of whom have constituents from the Caribbean who use MSBs, agree that de-risking is affecting a significant group of persons whom it was never intended to affect,” he said.

Cayman worked its way through the issue last year but it caused untold problems for many people for several months. Global bodies including the OECD, the Financial Action Task Force and the World Bank are still grappling with the domino economic effects of de-risking. The G20, the Financial Stability Board and the World Bank are currently fact-finding on de-risking in order to resolve the unintended consequences.

De-risking is a consequence of banks wanting to be seen by regulators to be fighting money laundering and terrorist financing. The levels of fines that regulators can levy for breaches has led banks to eliminate some perceived areas of business risk, especially where the returns are not that great, rather than attempting to mitigate or reduce the risk.

Panton explained that terminating certain types of banking business altogether is cutting off lines of business that were not intended to be captured by the regulation. He said that the money service business does not appeal to money launderers and terrorist financiers because the monetary value of the transactions are so small.

So rather than fight financial crime, the banks are through this de-risking hindering law-abiding individuals from conducting daily, necessary financial transactions, such as wiring money home to families. But Panton warned that this means people could turn to alternative means of money transfer, which have greater associated risks.

Cayman’s delegation for the Washington DC visit included Department of Financial Services Director Michelle Bahadur, Senior Legislative Policy Advisor André Ebanks, Cayman Islands Monetary Authority Managing Director Cindy Scotland and Deputy Managing Director (Supervision) Anna McLean.

The delegation met with representatives of the US Department of Treasury, the US Department of State, the World Bank, Jeb Hensarling (a Republican Member of the House of Representatives who chairs the House Financial Services Committee), senior staff for Gregory Meeks (a Democrat Member of the House of Representatives who sits on the House Committee on Foreign Affairs and the House Committee on Financial Services), and senior staff for Alcee Hastings (a Democrat Member of the House of Representatives who sits on the Congressional Caucus on the Caribbean).

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Category: Banking, Finance

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