#BTEditorial — Blacklisting, Derisking. Enough is enough

Banco, Banquero, Caracas, Miami, Estados Unidos, Visa, VISA, BFC, Victor Gill, Victor Gill Ramirez, Victor Augusto Gill Ramirez

The Law of Unintended Consequences, much like the concept of the Holy Trinity, is a phenomenon often cited but rarely defined to the satisfaction of agnostics.

In essence, the law posits that there may be actions which, when taken by governments and individuals, have unanticipated results no less prominent, profound or long-lasting than the ends originally intended.

Take ‘Father of Capitalism’ Adam Smith’s “Invisible Hand”, one of the guiding principles of modern economics. The butcher, the baker, and doubtless the modern equivalent of the candlestick maker, all have as their primary objective their personal enrichment; they intend to put food on their tables. But it is by their actions, that we derive the dinner and light on ours.

Some unintended consequences betray a paucity of thought and measures that are ill-conceived, poorly planned, half-baked, misdirected and wrongly executed.

Such fiascoes often have the obvious if unintended consequences of disruption, disappointment and discomfort.

We feel the same way about the Foreign Account Tax Compliance Act — FATCA — a 2010 US federal law requiring all foreign financial institutions to scour their records for customers with any links to the US, in a bid to smoke out tax dodgers among American citizens and permanent residents.

Over the last decade, the US has been joined by the Organisation for Economic Cooperation and Development — the club of the world’s richest capitalist nations. The OECD’s Common Reporting Standard (CRS) was also intended to detect tax cheats and money launderers and prevent the use of the banking system to fund terrorists.

But the ‘unintended consequence’ for us in the Caribbean has been a usurpation of the sovereignty of nations and real, lasting, direct harm to the economic and financial prospects of the average Caribbean man or woman.

We submit that the rights of ordinary individuals to put bread on their tables in these smaller, browner nations of the Earth have been — at the risk of committing some unknown heresy — imperilled, stunted and forestalled.

We say enough is enough.

CSME endangered

The blacklisting, delisting, and de-risking of banks and financial institutions have had the unintended consequence of stunting the economic growth and development of the 30-odd developing countries in the Western Hemisphere, half of which are in the Caribbean Community.

We do not seek to make the case on behalf of the Government of Barbados. They already have diplomatic and political tools at their disposal. But we address the policymakers on behalf of the thousands of small entrepreneurs, relatives, loved ones, students, consumers and producers who are thwarted in their attempts to use technological advances readily available to North Americans and Europeans to move money freely within our region.

The bold experiment that is the CARICOM Single Market and Economy is in grave danger when the free movement of goods, jobs and capital meets capricious restrictions on a few shekels.

Remittances threatened

Remittances — which have historically exceeded the sum total of Foreign Direct Investment inflows, Colonial Development and Welfare Funds during British postwar colonial rule, and the occasional largesse of large governments — are now spurned on the assumption that Mrs Belle in Belleplaine may likely be a terrorist sympathiser or, more likely, has no right to funnelling funds to Mrs St Louis in St. Lucia.

Try sending a little too much cash a little too often and for undisclosed reasons, funds are rudely and abruptly returned to senders. Try sending a little more money to conduct business, or engage in commerce, trade or charity and one is presented with forms which do nothing but add to mounting paperwork and due diligence costs of banks — so much so that transactions have become unprofitable to transmit through corresponding banks.

As our nations move inexorably towards being cashless societies, they need not be hampered by the clumsy, cumbersome, time-consuming, expensive exercise of feeding paper mills with the filling out of forms and declarations of who gets how much from whom.

Daily in the United States, Canada, Britain and the European Union, the smallest small business uses global money-moving giants Visa, MasterCard and PayPal to be able to swipe a credit or debit card with a smartphone to sell goods and services. At best, the outright denial of such services to us in the Caribbean, scattered as we are over vast waters and lands, smacks of economic xenophobia.

At worst, the provision of such services at an exorbitantly high cost, with lengthy delays and bureaucratic pettifogging is a — presumably unintended — act of economic warfare.

We say enough is enough.

Awash in funny money

We must act in our interests — even while protesting that neither the United States or any of the member nations of the OECD has yet been able to prove that any Caribbean Community member state, especially Barbados, is a hotbed of money changers engaged in terrorist intrigue and malevolent machinations.

On the contrary,  it has emerged that outcrops of rock, over which the British Union Flag flutters breezily, house the untraceable proceeds of the untouchable… in the billions.

From Jersey in the Channel Islands to George Town in the Cayman Islands, British protectorates are awash in washed, funny money.

For those engaged in development work in the Caribbean, there are incalculable hoops through which they must jump to prise precious coppers from the tight-fisted hands of European Union bureaucrats in Brussels. It is an open secret that it is Brussels has long been the seat of corruption, sharp practice and swamp-dwellers seeking to capitalise on development projects in the region, not the capitals of the Caribbean where everything is required in triplicate. But who will bell the cat?

We believe that the future good health of USCaribbean and UK-Caribbean relations in the wake of Trump and Brexit depends on the dismantling of FATCA, and the elimination of tax haven and terrorism funding blacklists.

FATCA, CRS existential threats

We submit that the intelligence services of the richest and most powerful nations on the planet, like any constable on a community beat, know exactly who, exactly where, and exactly how and how much evil misdeeds fund themselves.

They also have long known that we in the Caribbean are not the source. They also know who outside the region may wish to use its financial systems to finance terrorism, drugs trafficking, human trafficking and other transnational crime.

This information could be readily obtained, not from piles of financial disclosure forms stuffing shelves but by the already diligent — digital — vigilance which inevitably accompanies financial transactions by wire transfer or credit card, FATCA, CRS or no.

Much like the prohibition of alcohol and marijuana, the daily proscribing of Caribbean financial transactions automatically deemed suspect is not working. Yet, the Swiss get to keep their legendary banking secrecy. Deutsche Bank in Germany has proved to be a much greater grey elephant that any bank or credit union in the Caribbean.

If crooks want to fund the blowing up of train stations and planes they will not use dear Mrs Belle in Belleplaine or Mrs St Louis’s craft shop to send trickles of cash leading to a deluge. We simply lack the critical mass to achieve such nefarious ends without attracting the attention of regional and global financial intelligence watchdogs.

Ordinary human beings in the pursuit of a better life seek to put a decent meal on the table by developing domestic markets and industries in the Caribbean.

FATCA and the OECD’s CRS, complete with grand, misdirected posturing, are existential threats to Caribbean people and their way of life.

These must be called out for what they are and resisted.

Time for seamless, borderless, digital?

As Barbados assumes the six-month rotating chairmanship of the Caribbean Community, we call for the straining of every sinew to speak with one loud voice against the madness of unintended consequences of financial transactions — which cynical minds might suggest have had the very much intended consequences of throttling capital inflows and limiting our recovery from, and resilience to, external economic shocks.

But as we roundly condemn the actions of foreigners, we must get our own act together at home.

A generation ago, CARICOM nations introduced ‘currency convertibility’ — the acceptance of each other’s currencies for exchange. This practice has waned, as one by one, indigenous and foreign-owned banks and Cambios have opted out of the policy, leaving traders and travellers holding useless cash. This is an affront to the principle of the free movement of capital in the CSME.

It is time that we become coherent and cohesive about creating seamless, electronic transaction systems across national borders as a lynchpin not a luxury of this region’s economic development agenda.

Indeed this very week, the Governor of the Central Bank of Kenya Dr Patrick Ngugi Njoroge pointed the way to Caribbean possibilities through African realities of money being moved by cellphone from buyers to vendors of all walks of life. We have the benefit of a strong single currency in the Eastern Caribbean, whose ties to the dollars of the larger CARICOM nations ought to be much stronger and deeper.

The Government has announced it’s a developing a payments platform for the credit union movement and micro, small and medium-sized businesses, while the banks abandon the homegrown CARIFS network.

New digital currency players should be embraced by the financial services community — but we suspect that respect could be earned overnight if developed at a regional rather than a national level.

All this and more must be done, for the sake of our economies, sitting on a gold mine yet to be exploited — our own domestic productive power.

We say enough is enough.