IN­DUS­TRY ADVOCATES

Formed over 30 years ago with the aim of giv­ing a voice to the sec­tor, the Caribbean As­so­ci­a­tion of Banks is now help­ing mem­bers push back against ex­ter­nal threats

The Star (St. Lucia) - Business Week - - FRONT PAGE - BY CATHER­INE MOR­RIS, STAR BUSINESSWEEK COR­RE­SPON­DENT

The Caribbean bank­ing in­dus­try is a sec­tor un­der siege. Faced with an on­slaught of ramped-up reg­u­la­tion from global watch­dogs, the re­gion’s fi­nan­cial providers face a stark choice – com­ply, or face heavy penal­ties. The squeeze on so-called ‘tax havens’ be­gan shortly af­ter the 2008 global re­ces­sion and has steadily in­ten­si­fied, lead­ing Caribbean gov­ern­ments and bankers through var­i­ous it­er­a­tions of au­to­matic ex­change of in­for­ma­tion such as the US For­eign Ac­count Tax Com­pli­ance Act, Base Ero­sion and Profit Shift­ing and, most re­cently, the Com­mon Re­port­ing Stan­dard.

Gen­eral Man­ager of the Caribbean As­so­ci­a­tion of Banks (CAB) Mary Popo says this is a new era for the in­dus­try, with much at stake. “One of the things that has re­ally changed [since the CAB formed in 1974] is the bar­rage of reg­u­la­tion and leg­is­la­tion that has im­pacted the sec­tor,” she says. “We are not just lit­tle coun­tries op­er­at­ing in si­los, we are ex­posed to what hap­pens ex­ter­nally and in­ter­na­tion­ally.”

Many Caribbean na­tions rely on their fi­nan­cial ser­vices sec­tor – as a means of em­ploy­ment and a sub­stan­tial con­trib­u­tor to GDP – and, for these ju­ris­dic­tions, a black­list­ing can be dev­as­tat­ing. Saint Lucia had its own brush with the EU’s no­to­ri­ous tax haven black­list when it found it­self named and shamed in De­cem­ber 2017.

The coun­try was re­moved from the list four months later but other Caribbean ju­ris­dic­tions have not been so lucky, with some suf­fer­ing ex­tended stays on the dreaded list and oth­ers hop­ping on and off so rapidly that the in­dus­try can’t keep up. The re­sult­ing neg­a­tive press does not help the Caribbean shed its im­age as a hide­out for wealthy tax evaders.

“The rep­u­ta­tional risk is huge,” says Popo. “Per­cep­tion is very dif­fi­cult to change. We have to be very strate­gic and we have to have a plan. It will take a con­certed ef­fort by heads of gov­ern­ments to come to­gether and to re­ally strate­gise on this and do the things we ought to do.”

The CAB is play­ing its part by en­sur­ing the re­gion has a seat at the ta­ble for any in­ter­na­tional dis­cus­sions. CAB lead­ers are fre­quent at­ten­dees at IMF fo­rums, in­ter­na­tional con­fer­ences and high-level meet­ings. Popo says: “CAB has played an im­por­tant role in ed­u­cat­ing civil so­ci­ety, gov­ern­ments and the play­ers in the in­dus­try. We pro­vide in­for­ma­tion and raise the con­scious­ness.”

DE-RISKING

An­other press­ing is­sue on the agenda for the CAB is help­ing its mem­bers over­come the ef­fects of de-risking. In re­cent years, cor­re­spon­dent banks have re­trenched, clos­ing down op­er­a­tions in Caribbean coun­tries as they at­tempt to cut costs and min­imise risk. Popo ex­plains: “It is a busi­ness de­ci­sion. It is about the dy­namic be­tween risk and re­turn. Ev­ery time you have an­other black­list­ing it just ex­ac­er­bates it. Cor­re­spon­dent bank­ing re­la­tion­ships are so im­por­tant for us. The fi­nan­cial ser­vices sec­tor is the bedrock of the re­gional econ­omy. It is our liveli­hood.”

Popo sug­gests that bet­ter com­mu­ni­ca­tion, both with in­ter­na­tional banks and with the global fi­nan­cial ser­vices sec­tor in gen­eral, can help the re­gion main­tain its cor­re­spon­dent bank­ing re­la­tion­ships. Fi­nan­cial providers, gov­ern­ments and ad­vo­cacy groups need to be more proac­tive and vo­cal about the re­gion’s strengths, skills and sta­bil­ity.

Bankers can also look to tech­nol­ogy to re­duce costs and stream­line their

Gen­eral Man­ager of the Caribbean As­so­ci­a­tion of Banks (CAB) Mary Popo says this is a new era for the in­dus­try, with much at stake

com­pli­ance in­fra­struc­ture, us­ing trans­par­ent, strin­gent and cost-ef­fec­tive mea­sures to put in­ter­na­tional part­ners at ease. “Dig­ili­sa­tion gives banks the tools they need [to deal with the threat of de-risking],” says Popo.

“It helps them see where the gaps are [in their com­pli­ance in­fra­struc­ture] and work to close those gaps. Over the past five years we have seen an ac­cel­er­a­tion of banks that spend on tech­nol­ogy.”

Work­ing with fin­tech com­pa­nies can help banks au­to­mate their AML/CTF regimes and trans­form both back-of­fice and frontof-house ser­vices. In­no­va­tion can help providers stay ahead of the curve and sat­isfy cus­tomers and reg­u­la­tors. Popo points to Ap­pli­ca­tion Pro­gram­ming In­ter­faces (APIs) as an ex­cit­ing area with a lot of po­ten­tial for fi­nan­cial in­sti­tu­tions. APIs are an op­por­tu­nity for banks to col­lab­o­rate with fin­techs, re­sult­ing in a more per­son­alised cus­tomer ex­pe­ri­ence, new rev­enue streams, new prod­ucts and op­er­a­tional ef­fi­cien­cies. “APIs pro­vide that con­nec­tiv­ity, the fin­techs are there and they are evolv­ing,” says Popo.

With greater use of tech­nol­ogy, comes a cor­re­spond­ing in­crease in vul­ner­a­bil­ity. Banks nav­i­gat­ing this new space must make cy­ber­se­cu­rity a pri­or­ity. For Caribbean providers, it’s im­por­tant to keep an eye on tech­nol­ogy trends and prepare, says Popo who adds: “It’s like a hur­ri­cane – you know it is coming, so you have to ask your­self how you can prepare for it. Build­ing re­silience [to cy­ber threats] in the sec­tor is crit­i­cal.”

A BRIGHT FU­TURE

The threats may be many and the chal­lenges

great, but Popo is san­guine about the bank­ing in­dus­try’s sur­vival say­ing: “The way we bank is chang­ing and will con­tinue to change [but] I’m op­ti­mistic about the sec­tor’s fu­ture. Bank­ing is here to stay, just not in its tra­di­tional form. We have to find new and in­no­va­tive ways of do­ing busi­ness. We are in a trans­for­ma­tive stage.”

En­cour­ag­ing new blood into the sec­tor will lead to new think­ing in this trans­for­ma­tive pe­riod, and the CAB is fo­cused on sup­port­ing the next gen­er­a­tion of banks through train­ing, schol­ar­ships, men­tor­ing and net­work­ing.

The or­gan­i­sa­tion of­fers three US$10,000 bank­ing schol­ar­ships ev­ery three years and has also teamed up with Ban­gor Univer­sity and Univer­sity of Wis­con­sin-Madi­son to pro­vide schol­ar­ships to those schools. Popo says: “The op­por­tu­ni­ties for em­ploy­ment in the Caribbean are lim­ited so fi­nan­cial ser­vices is a sec­tor that gets a lot of young peo­ple coming in. It is an area that is at­trac­tive to them. Our young peo­ple are our fu­ture; we have to con­tinue to en­cour­age them and build their ed­u­ca­tion.”

There is def­i­nitely no short­age of in­ter­est and pas­sion in the sec­tor. The CAB re­cently held its 45th con­fer­ence in The Ba­hamas and around 250 at­ten­dees con­verged on the event to min­gle, learn, de­bate and dis­cuss. One of the main is­sues on the agenda was digi­ti­sa­tion and how banks can arm them­selves with tech­no­log­i­cal know-how to with­stand the chal­lenges ahead. It is a topic that res­onates through­out the in­dus­try, ac­cord­ing to Popo, who warns: “Bank­ing is evolv­ing and we have to evolve with it and be ready.”

Work­ing with fin­tech com­pa­nies can help banks au­to­mate their AML/CTF regimes and trans­form both back-of­fice and front-of-house ser­vices. In­no­va­tion can help providers stay ahead of the curve and sat­isfy cus­tomers and reg­u­la­tors

Mary Popo, Gen­eral Man­ager of the Caribbean As­so­ci­a­tion of Banks (CAB)

Gover­nor of the Eastern Caribbean Cen­tral Bank (ECCB), Mr. Ti­mothy An­toine (left) with Man­ag­ing Di­rec­tor of1st Na­tional Bank St. Lucia, Mr. Johnathan Jo­hannes at the re­cent CAB An­nual Gen­eral Meet­ing in Nas­sua, Ba­hamas

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