Last week in the House of Assembly, legislators discussed the growing threat of international banks limiting their Caribbean operations or withdrawing from the region altogether.
This practice has been dubbed “de-risking” by organisations such as the World Bank and the Caribbean Development Bank, which say that many international banks are taking such actions over fears of “high risk” customers who might be engaging in money laundering and other criminal activity.
Last Thursday, Opposition Leader Julian Fraser asked Premier Dr. Orlando Smith what government is doing to address the issue.
Dr. Smith responded that the Virgin Islands is a well-regulated jurisdiction, and that government is in discussions with the banking industry.
“I’ve personally written to banking institutions in the Virgin Islands, expressing the robustness of our regulatory system, in an effort to mitigate against these institutions potentially engaging in de-risking policies,” he said.
Mr. Fraser said that government needs to be doing more to protect the VI against de-risking because “it hasn’t come down yet, but it’s coming. And when it does, none of it can survive it.”
Under way?
But what Mr. Fraser warned against could actually already be happening in the VI.
Banking officials have been tight-lipped about the matter, but documents obtained by the Beacon in July show that at least 11 Panama-based trust firms are being denied banking services here.
Those documents include a letter to the Financial Services Commission from the trust firms, complaining that their accounts are being closed by CIBC FirstCaribbean International Bank despite the fact that they’re in compliance with FSC regulations.
The trust firms also stated in the letter that they tried to open accounts with Banco Popular and Scotiabank, but were denied.
“[Banco Popular] informed the licensees that compared to other banks, it has limited staff and therefore is unable to service offshore-related business,” the firms stated in their letter to the FSC.
Panama Papers
The source who provided the documents painted the banks’ de-risking policy as a knee-jerk and discriminatory reaction to the Panama Papers, a trove of more than 11.5 million documents leaked from the Panama-based law firm Mossack Fonseca that allegedly include evidence that VI-based companies were used for money laundering, tax evasion and other nefarious activities.
“They’ve been told, ‘Listen, this has been a scandal. People are expecting some kind of a reaction from us. We need to see accounts closing,’” said the source, who provided the documents on condition of anonymity. “And they just decided to round up these accounts because they look like they’re connected to something that has been in the news recently.”
CIBC denied that the policy is targeted at Panamanian firms, saying instead that it’s due to updated know-your-client rules.
Banco Popular and Scotiabank executives have not responded to requests for comment.
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