WHAT WILL US BANKS AND REGULATORS DO TO THE CARIBBEAN BANKS THAT TRY AN END RUN AROUND AML COMPLIANCE?

If you have seen the Comment posted in response to yesterday's article, NEW PILOT ALTERNATIVE PAYMENT AND SETTLEMENT SYSTEM OF FOUR CARIBBEAN CENTRAL BANKS ANNOUNCED, AVOIDING THE ROUTING OF CBI MONEY THROUGH THE U.S. BANKING SYSTEM, here is the relevant section:

"Thanks for posting Kenneth Rijock . As we see this will not just assist CBI programs but also avoid or circumvent regularly checks... The question is what the corresponding banks and the regulators will do to these banks."

The three banks involved in the proposed program, in Barbados, the Bahamas and a yet-unnamed third Caribbean state located outside the ECCB, could lose all their US correspondent banking relationships, in response to what is an obvious effort to evade American banking best practices compliance programs. Perhaps American regulators, such as FinCEN and OFAC, now under new leadership, might choose to mete out sanctions, and even civil penalties.

Add to the mix what responses we might see from the global financial services industry to what can only be regarded as new and emerging threats due to what will become a regional Caribbean payments sector not prepared to meet the challenges of cross-border operations, and in dire need of professional assistance to function efficiently. Finally, linking this Caribbean structure to the African payments system, could expose it to AML/CFT threats that sector is still grappling with.

Will this create a financial hornets' next which is initially unmanageable, requiring external intervention or even abrupt termination? We cannot say, but we will be watching.