PM critical of Europe over the development of region’s financial sector

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Antigua and Barbuda has accused Europe and the Organization for Economic Cooperation for Development (OECD) of seeking to push Caribbean countries out of the business of providing international financial services.

St. John’s is also suggesting that Caribbean Community (CARICOM) countries take the matter before the World Trade Organization (WTO).

Addressing the annual general meeting of the Caribbean Association of Audit Committee Members, Prime Minister Gaston Browne said that the Caribbean region is under assault by forces in the external community, who have disguised the plans to dismantle the region’s financial sector through various measures.

He said that those external forces have spoken of  “profit erosion”, “tax havens”, “money laundering” and “counter terrorism financing” as their concerns, when in reality, the objectives of these external agencies appear to be designed to cripple competition in the financial services sector.

He said that having dominated the sector until the mid-1980s, financial centres in developed countries found that newcomers to the sector, particularly in the off-shore sector, were becoming highly competitive.

Browne said lower tax rates and efficient and lower cost services for a range of products from jurisdictions in the Caribbean, led the European Union, through the OECD to launch their “harmful tax competition initiative.

“In effect, that initiative was designed to try to stop competition in financial services by coercing smaller jurisdictions to adopt tax rates that approximated the higher rates in Europe. Regrettably, smaller jurisdictions did not coalesce to resist this imposition on their sovereign rights by a body that had no international authority to do so.

“Instead, some jurisdictions individually acquiesced to OECD and EU pressure, fracturing any attempt at unified resistance. Acquiescence of sovereign rights is a slippery slope. Once the slide begins, the fall is difficult to stop, and almost impossible to reverse,” Browne warned.

He told the meeting that over the years, the EU and OECD’s assault on the Caribbean’s offshore financial sector crept into the onshore sector, engulfing all in their increasing demands to push the regional jurisdictions out of the business of providing international financial services.

“Now, we have come to the point where in March of this year, the European Union black listed countries that they claim do not meet tax good governance.

He said in the case of Antigua and Barbuda, the Europeans placed it on a monitoring list “because we have made commitments to implement changes in our legislative and enforcement regimes by December of this year.

“As a group, CARICOM countries have expressed concern that the new listing by the EU Council constitutes an infringement of our sovereign right of self-determination. We have said that it is starting to border on anti-competitive conduct, targeting the decimation of international business and the financial services sector in the Caribbean.”

Browne said CARICOM has said collectively that “we believe the EU council is trying to destroy the financial sector in our member states even as we try to develop resilience in our economies to mitigate our inherent vulnerabilities of small size, limited resources, and exposure to natural disasters.

“But, we live in a world of intolerance for the development aspirations of the small and of increasing imposition of the doctrine that might is right. Of course, we could collectively take the EU to the World Trade Organization on the basis that its actions are a restraint on our ability to trade.”

Browne said that it is an option that should not be taken off the table.

“We should not take it off the table because it appears that no matter how much our jurisdictions adopt draconian laws and pay for expensive enforcement machinery, new and more intrusive demands are made.

“We have wounded our financial services sector by a thousand cuts already.  Is it that the only time that external forces will be satisfied is when our financial services sector is dead and buried?

“I say, we cannot allow that to happen. I say, we have a right to compete in the global marketplace on a level playing field with all. I say, that the interests of our economies and of our people are as important and vital as anyone else’s, and we should fight for them against injustice and imposition.”

Prime Minister Browne told the conference that there are also a serious threat posed to the economies of regional countries from de-risking and the loss of correspondent banking relationships (CBRs).

He warned that without CBRs, the global financial and trading system would come to a halt, and affected countries will drop into poverty from which recovery will be costly both in time and money, but more importantly in human life.

“This grave threat has been hanging over the Caribbean now for almost half a decade; and it shows no sign of abating. Right now, in many parts of the region, the majority of banks are reduced to only one correspondent bank, and at an extremely high cost.

“Consequently, the cost of doing business is escalating, even as we try to cope with high debt, incurred largely to recover our countries from disasters,” Browne said, noting that since 1966,  the United Nations has recognised and codified in international law the right of people to pursue their economic development as a fundamental human right.

“In this connection, deprivation of CBRs to our countries is deprivation of a fundamental human right. It is about the right to survive and to prosper and not to wash-up on the shores of the rich, begging for a living if not for life itself.”

Browne said as the recently appointed chair of the sub-regional Organisation of Eastern Caribbean States (OECS) grouping, he has made it clear “that under my watch there will be an organized and vigorous promotion to identify CBRs for re-engagement, re-assessment and re-risking of our financial institutions.

“We are ready to work with the Caribbean Association of Banks, our Central Bank, and international banking authorities to promote agreed strategies that will demonstrate that our jurisdictions are compliant with the various requirements of all the external agencies.

“We will also comply with the Financial Action Task Force’s AML/CFT guidelines to ensure that we are not included in any black or grey lists. But where those lists are unreasonable and unfair, we will publicly and openly voice our concerns. We will not silently fade away, allowing our countries to wither and our people to suffer.

During his address, Prime Minister Browne also made reference to the controversial Citizenship by Investment Programme (CIP) where some Caribbean countries provide citizenship to foreign investors in return for making substantial investment in the socio-economic development of those countries.

Browne said that the CIP I”which have quite literally saved our economies from decline in the face of poor terms of trade, repeated natural disasters, diminished aid and high costs of imports,” is facing pressure from external forces.

“The CIP is not unique to the Caribbean. It competes with similar programmes in Europe and North America. Perhaps, that is a reason why, like financial services, it is under assault by external forces.

“But, CIPs involve greater and stronger due diligence on their transactions than apply to others.

Certainly, CIPs prevent money-laundering since funds received by the government for approved applicants are non-refundable. Nonetheless, some correspondent banks have shied away from transactions related to CIPs.

“In this regard, I urge Caribbean banks involved in this service to demonstrate to their correspondent banks the extreme care and due diligence used in managing the CIP product. By clear policies and procedures, they should demonstrate why CIPs do not pose a risk to the integrity of correspondent banking relationships.”

Browne said he was also prepared in his capacity as the OECS chairman, to assemble a team of government officials, CIP executives, AML/CFT experts and our banks to hold joint meetings with correspondent banks to sensitize them on the integrity and security of the CIP application and approval process.

“The CIP programmes are too important to our economies and to the welfare of all, including the banking sector, for us not to run the extra mile that might be necessary to disabuse misconceptions and to build-up confidence in them,” he added.