At the end of May 2015, I wrote a letter to your newspaper captioned: “In case you have not noticed.” Therein, I pointed out some crucial issues related to the de-risking of Belize Bank. Since then another of Belize’s banks, Atlantic International Bank Limited, lost its correspondent bank account with Bank of America. Once again I’d like to elaborate on the concept of de-risking.
In the aftermath of Atlantic International Bank having been denied access to the US financial system, spin doctors from the Ministry of Finance, the Financial Intelligence Unit as well as the Central Bank of Belize began damage control, using euphemisms about safeguarding US assets and correspondent banks looking into ratings and tainted money. I believe your editorial of 28th August was more informative on possible reasons for Belize’s lack of access to US financial system.
Amandala’s editorial on August 28th 2015, The Jewel Gangster, informed us that, “Belize is a country where people live, overall, well above their means. The reason for that is that Belize is a country where there is a lot of trafficking of illegal commodities, such as narcotics and human beings and travel documents. The Jewel is a gangster.” In such an environment, the importance of the professional money launderer to the success of organized crime becomes clear. Accountants, lawyers, bankers, traders, and business people of all colors may be involved in the black art of money laundering. If that is so, then the issue of money laundering may very well be of concern to the Belizeans both at home and abroad.
I’d like to point out that de-risking is not just about money laundering. The Financial Action Task Force (FATF), the international standard-setting body for anti-money laundering and combating the financing of terrorism (AML/CFT), has made clear that compliance with AML/CFT international standards is not the only reason for de-risking. They agree that many other drivers could influence financial institutions’ decisions about how they manage client risk. Some of those drivers include: concerns about profitability, prudential requirements, and anxiety after the global financial crisis, uncertainties regarding legal obligations and regulatory expectations on financial sanctions, and reputational risk more generally. I interpret “reputational risk” to mean the well-known narcissistic schemes of the Barrow administration, for nationalizing foreign owned assets.
To shed some light on the de-risking phenomenon, I need to go back in time. Once upon a time, that time was 1989, a group of well-intentioned people from the United Nations, the G7 countries, got together to develop policies to combat money laundering. Out of the fruits of their labor was born an intergovernmental organization, the Financial Action Task Force, or FATF, as it is called. Initially, forty “recommendations” were issued. One such recommendation: the establishment of a financial intelligence unit to receive and disseminate suspicious transaction reports, and cooperate internationally in investigating and prosecuting money laundering. This development gave birth to Belize’s Financial Intelligence Unit (FIU).
Then along came the 2001 September 11th attack on the World Trade Center in the United States. Thus, October 2001, FATF issued 8 Special Recommendations on Terrorism Financing. Since the 911 incident the United States Congress adopted a series of measures designed to use the threat of sanctions to present non-U.S. banks and other non-U.S. entities not directly subject to U.S. law with a stark choice—cease engaging in targeted activities or face sanctions, including the denial of access to the U.S. financial system. With one signature, section 311 of the USA PATRIOT Act, the Secretary of the Treasury empowered the Financial Crimes Enforcement Network (FinCEN) under the auspices of the US Department of the Treasury to Issue and interpret regulations authorized by statute and to support and enforce compliance with those regulations. Most banks followed the rules. Some did not. In 2012, authorities separated HSBC from $1.9 billion for money laundering violations. HSBC acknowledged that they were enabling clients to avoid U.S. sanctions.
Since then there have been many developments, but most important in terms of Belize with respect to U.S. Bank Secrecy Act / anti-money laundering and U.S. sanctions programs, is that US Congress adopted – for the first time – legislation that requires the President of the United States to impose sanctions on officials of the Government of Venezuela or their proxies, if the President determines they have engaged in human rights abuses in response to anti-government protests that began in February 2014.
On 8th March 2015 Barack Obama signed Executive Order 13692 Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela. This is known as ASSET BLOCKING —the exercise of all powers granted to the President by the International Emergency Economic Powers Act of Congress, to the extent, necessary to block and prohibit all transactions in all property and interests in property of a person determined by the President, if such property and interests in property are in the United States, come within the possession or control of a United States person.
The Barrow administration needs to keep in mind that the US government has placed sanctions on Venezuela, and via any of the eight (8) key players involved in the current Belize Petro-Caribe Scheme: the Government of Venezuela, the Government of Belize, PDVSA, PDV Caribe, BPEL, APBEL, Trafigura (the Buyer), and Puma Energy Belize (the Importer), Belize may be enabling the avoidance of US sanctions. Thus, US banks facilitating the transfer of this money may face large fines for enabling clients to avoid US Sanctions. With this fear in mind, US banks may prefer to de-risk – close correspondent accounts for banks in Belize – as opposed to paying the hefty fines of the US Justice Department. When spending Petro dollars the Barrow administration needs to refrain from buying trinkets and baubles. Remember this money comes to Belize at a dear price in terms of interest and possibly denial of access to the US financial system. Only genuine investment in people shall generate lasting results.
In addition to UN and US sanctions, there is yet another reason for so-called “de-risking.” It goes far beyond AML and CFT. The activities and transactions of individuals generally referred to as Politically Exposed Persons (PEPs) and Reputational Exposed Persons (REPs) found in negative media, can be grounds for de-risking. In the case of PEP or REP, Jurisdiction with weak money laundering regulations where corruption is endemic (Belize), the definition extends to immediate family members and known close associates. In a nutshell, PEPs are individuals whose prominent position in public life may make them vulnerable to corruption.
Finally, of special interest to all Belizeans and politicians, the Governor of the Central Bank has informed us that two other local banks have since indicated that their existing Bank of America relationship is under review. Should those two banks be denied access to the US financial system, Belize’s informal economy shall experience alarming growth. People, get ready!
Yours for a Better Belize,
(Signed) Urban A. Reyes
5th September 2015
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