THE BLACKLISTED…AND THE BACKLASH!

16 May 2017


12 Potential Ramifications of the recent Flagging of Caribbean & LATAM Countries

A Firstline Securities Limited Blog by: Ahamad Hosein

 

We have not yet hit the mid-year 2017 mark, and already most of the Caribbean and Latin American region has been blacklisted by the United States of America.

The United States’ International Narcotics Control Strategy Report (INCSR) should be reviewed in detail for further information.  Volume I covers Drug and Chemical Control Activities, whilst Volume II  focuses on Money Laundering and Financial Crimes.

The Caribbean countries which have been included on this list are: Antigua and Barbuda, the Bahamas, Barbados, Dominica, Haiti, Guyana, Jamaica, St. Kitts and Nevis, St. Lucia, Trinidad and Tobago and St. Vincent and the Grenadines.

So, what does this news mean for our paradise Caribbean countries?  Here are 12 thoughts:

 

  • Tighter controls from the U.S. will be implemented.

 

  • As a result of the above (# 1), a cultural change in Caribbean national’s financial habits can be expected. For instance, the region may need to prepare for a shift from a reliance on cash transactions – to the adoption of a more card-based approach.  This is due to the fact that cash transactions will be monitored and audited even more closely than before.

 

  • The risk of losing more correspondent banking relationships will be increased.

 

  • Costs associated with the correction of defects and areas of high risk will also rise.

 

  • Skilled and experienced staff will possibly be required from developed countries in the early stages of the implementation of these tighter control measures. Employment opportunities will be created for Caribbean nationals, however, as new areas in compliance come on stream (such as enforcement, financial interrogation and detection, project management, legal representation and regulatory controls) a learning curve period would be expected until the requisite level of local/regional expertise is attained.

 

  • The operating environment would become increasingly difficult for everyone: from businesses which need to reduce their dealing in cash; to banking systems as more electronical transactions come into play, labour force which would be forced to receive payments via bank transfers etc. Monitoring, recoding and reporting areas within financial institutes will be increased so as to cope with the increase in transactional and reporting requirements.

 

  • Increased average remittance costs are to be expected.

 

  • Tax transparency will be required from both the Board of Inland Revenue, and from and taxpayers. This means that all activity will be reported to be able to identify tax evaders/ abusers.

 

  • Expanding sanctions regime: there would be a challenge for local banks to comply with increased internal requirements, which could result in them being placed on the sanctions list for non-compliance.

 

  • Loss of investments and foreign currency due to being de-risked by US financial institutions which are in jeopardy of losing correspondent banking services.

 

  • The enforcement landscape will need to change in order to comply with these new requirements.

 

  • Fines should be expected for any misconduct related to a breach of sanctions. Businesses should brace themselves for a rise in fines due to heightened compliance measures and higher risk profiled clients.

 

 

For details on the INCSR’s 2017 reports, see the following links below:

 

https://www.state.gov/documents/organization/268025.pdf

https://www.state.gov/documents/organization/268024.pdf

 

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