WASHINGTON, USA — Antigua and Barbuda’s Prime Minister Gaston Browne electrified a gathering of representatives of international agencies and governments in Washington DC on Saturday by reproaching developed states for undermining the development of small states by the withdrawal of correspondent banking relations.
The prime minister was speaking at a Small States Forum organised by the World Bank as part of the week of meetings of the Bank and the International Monetary Fund (IMF).
Browne told the Forum, “It is unconscionable that developed states, which control the international payment system, have increased the vulnerability of small states by creating artificial impediments that undermine our development.”
Speaking in the context of the devastation of several Caribbean countries by Category 5 hurricanes in September and the reversal of years of economic development, the Antigua and Barbuda leader declared that “correspondent banking is a global public good and should be available to all countries and all regions”.
Stating that banking relations “is a fundamental human right that is just as important as the provision of other basic services such as water, electricity and broadband services”, Browne told the high-level audience that “the socio-economic impact of de-risking is more severe than any hurricane”.
He added that “de-risking is not only an existential threat but one of the most egregious acts committed against small states”.
The Antigua and Barbuda prime minister’s statement received strong support from the leaders of other small states in Africa, the Caribbean and the Pacific as well as representatives of international agencies.
“We are being de-banked from the international payment system,” he declared, adding that “the provision of correspondent banking service cannot be seen exclusively through the lens of risk and profitability”.
Urged by several delegations to the Forum to propose machinery for tackling the situation in a global way, Browne recommended the establishment of a “high-level working group on de-risking and developmental funding for small island states”.
He said the work of the group should be focused on: achieving highly concessional terms for small states to build capacity; gaining access to funding to finance adaptation and mitigation to the dangerous effects of climate change; quick response to crises through immediate availability of funding; as well as mobilisation of funding for private sector entrepreneurial development and economic diversification.
At the invitation of World Bank president, Jim Yong Kim, who chaired a high-level ministerial meeting on Friday, Browne will submit his proposals to the bank for consideration of new ways to tackle financing in the context of the effects of climate change and global warming.
The full statement by prime minister of Antigua and Barbuda, Gaston Browne, at Small States Forum at the World Bank, Washington DC, on “From Roadmap to Action” on Saturday 14 October, 2017:
The vulnerabilities of Small Island Developing States (SIDS) are well-known and include:
- Climate Vulnerability
- High Debt
- Structural vulnerabilities due to small size and limited capital formation
- Socio-economic vulnerabilities.
In light of these known vulnerabilities, it is unconscionable that developed states, which control the international payment system, increase the vulnerability of small states by creating artificial impediments that undermine their development.
In addition to the wrongful and per capita income criterion, which should be abolished, another such artificial impediment is de-risking.
De-risking is not only an existential threat but one of the most egregious acts committed against SIDS by these states. The socio-economic impact of de-risking is more severe than any hurricane. Its consequences are far reaching, and have undermined the payment systems of SIDS. Even payments for medicines, education, healthcare, tourism receipts and remittances are threatened, as the systems in these developed countries have the effect of de-banking SIDS from the international payment system.
De-risking is an act of aggression against SIDS, in which their citizens and institution are being systematically denied correspondent banking relations. Correspondent Banking is a global public good and should be available to all countries and all regions. It is a fundamental human right. It is as important as the provision of other basic services including water, electricity and broadband services. Therefore, the provision of correspondent banking service cannot be seen exclusively through the lens of risk and profitability.
SIDS do not have access to any settlement currency or correspondent banking architecture, other than those that are centralized in these developed correspondent banking states. And, whereas correspondent banking is centralized in these developed countries, it should not be utilized as a tool to de-bank SIDs.
To de-bank countries and regions is to put the SDG’s beyond their reach and plunge their peoples into poverty.
SIDS are fully cooperative, committed and compliant with AML/CFT requirements including the adoption and implementation of laws and regulations, and institutionalisation of supporting administrative frameworks. We understand our role and are playing our part in guarding against the ills of money laundering, terrorism financing and narco-trafficking.
Note should be taken that de-banking SIDS, is to undermine the fight against AML/CFT and to create fertile ground to drive these illicit activities underground. Therefore, de-risking is not and will never be an effective mechanism to counter terrorism financing or money laundering.
The indiscriminate application of de-risking strategies is impeding trade, distorting competition and undermining human development; with the capacity to destroy countries and regions.
The focus of de-risking should be to exclusively target and punish the criminals and their accomplices, and not to punish innocent populations and ruin the economies of small countries.
Many small island states, including Antigua and Barbuda, have been stigmatized as major tax havens and money laundering centres. The very size of these jurisdictions and small volume of transactions, contradict this fallacious classification. For example, Antigua and Barbuda has only $3 billion in banking assets, with less than a few dozen remittances daily. The very small size of the market and low transaction volume, would give rise to easy identification and traceability of illicit flows by the robust AML/CFT laws, regulations and administrative framework that exist today.
It is instructive that there is a presumption of money laundering involving financial flows to the Caribbean through their citizenship by investment programmes, but these very investors can move funds seamlessly, to invest in the investment residency programs of some of these developed states. Interestingly, it is in these very developed states, where 95 percent of global illicit flows take place, that de-risking systems are imposed.
The most effective mechanism to fight AML/CFT is global cooperation among all states. The present de-risking dispensation brings no real value, but punishes the innocent and undermines development. De-risking is a wrong that has been committed against us. Passive adaptation to this wrong is not the answer, we must fight for change.
Today, I call upon all SIDS to unite and demand that these developed states correct this wrong that has been committed against us.
Accordingly, I formally propose the establishment of a high-level working group on De-risking and Developmental Funding for Small Island States.
The group should work on achieving IDA concessional terms for small states including:
- Official Development Assistance to build capacity
- Access to climate funding to finance adaptation and mitigation
- Concessional funding for quick response to crises
- Mobilisation of Private sector funding for entrepreneurial development and economic diversification.