WILL FINCEN'S WARNING ABOUT MORE ENFORCEMENT AFTER $3bn TD BANK MONEY LAUNDERING FINE CAUSE THE CLOSURE OF U.S. CORRESPONDENT ACCOUNTS OF CARIBBEAN BANKS?

While America's bankers were happily contemplating a reduced regulatory world in the aftermath of the recent presidential election, they have neglected to pay attention to the single voice predicting more enforcement actions, a la TD Bank. One senior FinCEN official stated at a recent NY bankers' conference that we should expect more painful civil penalties, all tied to AML risk failures. The billion dollar fine is just the first of its kind, if we read the tea leaves.

What may result, in the aftermath of the TD scandal, is that those of America's largest banks that continue to facilitate money laundering in their lucrative correspondent accounts of indigenous Caribbean financial institutions may make a command decision to close those that accept funds for Citizenship by Investment (CBI/CIP) applications, because of the new regulatory focus on risk. They will choose to reduce the risk of joining TD in the rogues' gallery of banks incurring megafines, especially since the public release of evidence confirming that millions in application fees are being remitted for illegally-discounted contracts, therefore constituting acts of money laundering.  

We note that, notwithstanding the release of overwhelming evidence indicating the proceeds of CBI crime is flowing into correspondent accounts in New York and Miami banks, none of them have taken the step of closing those accounts, to mitigate any potential fines coming at them in 2025. Perhaps senior bank management is gambling that they will be ignored, in favor of other banks. In any event,  we predict that as soon as one U.S. bank is hammered for allowing repeated CBI payments to be laundered through its accounts, there will be a rush by others to shut down that pipeline into the American financial structure, without delay. What that will do to the local economies will be significant, given that most consumer goods are imported from the United States, but local Caribbean bankers should have considered such an outcome, when they gleefully accepted dodgy payments without conducting effective due diligence on their CBI customers.