Caribbean bank supervisors conference opens
Warning sounded on money laundering risks By Patrick Denny
May 10, 2002
Articles on economic concerns
Caribbean bank supervisors were yesterday reminded of the risk of money being laundered through the official banking system and the use of the system to aid and facilitate terrorist activities, which has now become a major focus.
Delivering the main address at the opening of the three-day Twentieth Annual Conference of the Caribbean Group of Bank Supervisors at Le Meridien Pegasus Hotel, Budget Director in the Ministry of Finance, Dr Ashni Singh, said that apart from the illegality involved, money laundering in economies as small as those in the region could have significant influence on currencies, market prices and financial stability.
As regulators, he said, the bank supervisors would be aware of the need for concerted efforts to secure the integrity of the regional financial systems from being used for illegal or illicit purposes.
Noting that the Caribbean faced the reality of shallow and underdeveloped markets, including capital markets, Singh said that the monitoring and disciplining influences of the market were diminished, and the task of institutionalised regulation and supervision had to be performed without the aid of credible market signals. He added that good corporate governance and sound economic performances were demanded by the rigours of market monitoring.
Referring to technological innovations in the banking industry, including internet banking, Singh said that similarly, financial engineering innovations presented both opportunities and challenges to banks and the financial sector on the whole. If the design and use of complex derivative instruments, which represent major and rapid advances in financial engineering, were used in an uninformed manner and without adequate safeguards and controls they could result in the demise of entire institutions as has already been the case outside the Caribbean.
"While the appearance of innovative financial instruments on the balance sheets of financial institutions is relatively new and limited in the Caribbean, their inevitability necessitates a greater state of readiness on the part of market participants and regulators alike," he said.
Among the other formidable challenges the region faced, he said, were the pressures exerted by international standards, stipulations and pronouncements. In addition, he noted that the recent experiences and debate on the notion of allegedly harmful tax competition and uncooperative tax havens in the Caribbean were cases in point.
The conference being held under the theme `Evolution and Dynamics of the Supervisory Processes in the Caribbean', will discuss among other topics `Implementation of international standards', `Corporate governance issues', `Technology inter-relationship', `Regulatory integration', Changes in accounting standards', and `Macro-economic stability'.
Meanwhile, Singh announced that a Commissioner of Insurance was to be appointed shortly in a bid to strengthen supervision of the insurance industry.
He also told the gathering that the process of privatising the Guyana National Cooperative Bank will continue apace.
Singh noted, too, government's intention to strengthen the Bank of Guyana Bank Supervision Department (BSD) as well as to amend both the Bank of Guyana and Financial Institutions Act to tighten some gaps in the legislation identified recently.
Over the past year, he said, the country had its fair share of difficulties including the demise of Globe Trust and Investment Company Ltd, a deposit taking institution. Some blame for its demise was levelled on the laxity of the BoG Bank Supervision Department.
In addition, specific borrower sectors, the rice industry in particular, came under pressure due to weather and market conditions, he said, recalling that in the nation's interest the government and the Guyana Association of Bankers reached an agreement on a relief package to facilitate restructuring of loans to small borrowers in the sector.
In spite of the difficulties, Guyana achieved a number of significant advances in its efforts to strengthen and deepen its local financial sector. These included the licensing of the country's first merchant bank and the constituting of the Guyana Securities Council. Guyana was also in the process of putting in place regulations to operationalise the Guyana Securities Exchange and steps were being taken to bring into operation the money laundering (Prevention) Act and to strengthen supervision of the insurance industry, he said.
Singh reiterated that the contracting and slowing of economic growth in the region was due to the under-diversification of the region's economies and the fragility that resulted from this structural weakness.
He noted that the Caribbean Development Bank reported last year that, of its 17 borrowing member countries, 13 recorded lower rates of real economic growth than in the previous years and six, negative growth.
He reiterated that real or negative growth in the region's economies was dependent on agricultural industries which are susceptible to weather fluctuations and volatile market pricing; and tourism with its vulnerability, to external shocks as evidenced by the September 11 terrorist attacks on the US.
Among those attending the conference are delegates from the central banks of Aruba, the Bahamas, Barbados, Belize, Guyana, Haiti, Jamaica, Suriname, the Netherlands Antilles, Trinidad and Tobago and the Eastern Caribbean Central Bank (St Kitts & Nevis). Others include representatives of the Financial Services Department of the British Virgin Islands, the Cayman Islands Monetary Authority, the CARICOM Secretariat, ASBA of Mexico, BASEL of Switzerland, the Caribbean Anti-money Laundering Programme and the Federal Reserve Bank of Atlanta, USA.