RENTAL DEAL!

ISSUE 147 Friday 11th MARCH, 2016
Page 15
A CARIBBEAN BANKING AGENCY IN THE US?
By Sir RONALD SANDERS
Caribbean governments,
indigenous
banks and offshore
anks located in the Caibbean
are extremely
oncerned about the withrawal
of correspondent
elations from Caribbean
anks by banks in the
nited States (US).
Caribbean Heads of Government
at a meeting in Belize
in February made their
concern very clear. The
Caribbean Association of
Banks have done so in separate
statements.
Their sense of alarm arises
from the fact that, if all correspondent
banking relations
are withdrawn, the
region will be isolated from
the rest of the world and will
be unable to carry out the
most basic of bank transactions.
In many Caribbean countries
there has been a steady
decline in such correspondent
banking relations, and
there is no sign of an early
abatement.
Caribbean governments
and banks are not alone in
their concern. Other regions
of the world are also similarly
affected. Countries in East
Asia, the Pacific, Eastern Europe
and Central Asia with
significant offshore banking
activities, are also affected.
What has caused the withdrawal
of correspondent relations
to the Caribbean and
the other regions identified
above is the huge penalties
that US banks would have to
pay if any incidence of money
laundering, terrorism
financing, or tax evasion
passed through them from
their respondent banks.
Regulatory and enforcement
agencies have dealt
harshly with such incidents,
creating a strong deterrent
to taking risks. The simplest
form of “de-risking” is to
terminate correspondent
banking relations.
Paradoxically, the very
rule-making bodies, such
as the Financial Action
Task Force (FATF) and the
Financial Stability Board
(FSB) that created the rules
and penalties that now terrify
US banks and encourage
them to “de-risk”, are themselves
becoming concerned
about the decline in correspondent
banking relations.
Last November, the FSB
released a statement saying:
“At the extreme, if an
individual bank loses access
to correspondent banking
services, this may affect its
viability and if a country’s
banks more generally face
restricted access then it may
affect the functioning of the
Re Thin Business
rentaceo@gmail.com
Brian G Stone,
MBA, Business Consultant
dent banking were concerns
about money laundering and
terrorism financing risks
in the jurisdictions of their
counterpart banks”.
In other words, even
though US Banks are aware
that, in the case of the Caribbean,
organizations such
as the FATF and the OECD
Global Forum on Tax Matters
have found jurisdictions
to be compliant with rules
and enforcement, they are
unwilling to take the risk.
The FATF has given an
undertaking to the FSB that
it will “clarify regulatory
expectations, as a matter
of priority, including more
guidance, on the application
of standards for anti-money
laundering and combating
the financing of terrorism
(AML/CFT) to correspondent
banking, especially on
the customer due diligence
expectations for correspondent
banks when faced with
respondent banks in ‘highrisk
scenarios’, as well as
additional work on remittances,
financial inclusion
and non-profit organizations”.
That work will be ready
in two stages in June and
October 2016. Whether it
will make any difference
to banks in the US is left to
be seen. In any event, at the
rate at which correspondent
banking relations are being
local banking system.
In addition, loss of correspondent
banking services
can create financial exclusion,
particularly where it
affects flows such as remittances
which are a key
source of funds for people
in many developing countries”.
The report rightly observes
that: “The ability to
make and receive international
payments via correspondent
banking is vital
for businesses and individuals,
and for the G20’s goal
of strong, sustainable, balanced
growth”.
In the statement, sent to
the group of powerful nations
– the G20, the FSB
stated that a World Bank
survey of jurisdictions and
banks finds that roughly
half of the emerging market
and developing economies
surveyed have experienced
a decline in correspondent
banking services. Three
quarters of the 20 large correspondent
banks participating
in the survey responded
that the number of correspondent
accounts they hold
for other banks had declined
between end 2012 and mid-
2015.
The FSB report did not
end there. Significantly, it
stated that “the main drivers
given by the large banks for
their reduction in corresponwithdrawn,
any FATF recommendations
in October
2016, even if they are helpful,
may come too late to
help some Caribbean banks
that are already reduced to
tenuous relations with just
one correspondent bank.
In this scenario, it is imperative
that Caribbean
banks cease their reliance
on US banks alone for their
correspondent relations in
the US. It is time that they
jointly, in groups, or individually
establish an agency
of their own in the US to be
their correspondent bank
and handle their transactions
in the US and beyond.
They have to ensure that
they will be able to do business
if US banks abandon
them. And, it must be the
banks themselves – not Caribbean
governments – that
undertake the establishment
of such an agency. Governments
can advocate for the
agency with us authorities
and provide any non-financial
assistance than may be
helpful, including diplomatic
and political spadework,
but it must be the banks that
look after their own business.
Establishing a Caribbeanowned
agency in the US to
provide correspondent relations
for regional banks is
not impossible, though it
is difficult and will require
investment in time, money
and professional advice. An
application for such an entity
would have to be made
concurrently to the Federal
Reserve Bank and the Office
of the Comptroller of
the Currency (OCC).
If the application is approved
by these two bodies,
a licence to operate can then
be sought from the Northeast
District Licensing Division
in New York. There are
strict and onerous criteria
that would have to be satisfied
in each case, including
extensive background
checks on the banks and
their affiliates and reviews
of the effectiveness of the
regulatory regimes of the
jurisdictions in which they
are located.
The procedure could take
longer than six months and
would require the banks
to dedicate staff or employ
qualified consultants to see
them through the process.
But, there is no swift or
easy solution to the present
problem.
If Caribbean banks believe
that there is no risk to
US Banks in the provision
of correspondent relations,
then they should be prepared
to take the risk themselves
by setting up their
own agency to facilitate
their business. They might
even make more money.
Leadership Vs Management? Ask the Military!
For many business
executives, leadership
and management
in practice is often
welded together under a
one-and-the-same definition
which effectively diminishes
the significant
differences and blurs the
fundamentals of each.
Leadership is not management,
nor are managers
necessarily leaders! The importance
of this truism as it
relates to everyday business
functions is the recognition
by introspection and evaluation
of human capital as it
relates to performance.
A proper analysis of a
firms’ performance analytics
requires the study of its
financial results which is
effectively an examination
of the decisions made by its
leaders and managers. Regrettably,
many companies
fail to evaluate their decision
making processes when
performing a root-cause
analysis in problem solving.
The academic definition
of Leadership is “The action
of leading a group of people
or an organization, or the
ability to do this”- Oxford
Dictionary.
“If your actions inspire
others to dream more,
learn more, do more and
become more, you are a
leader”- John Quincy Adams.
Whereas Management
is defined as “The process of
dealing with or controlling
things or people”- Oxford
Dictionary.
A more pragmatic “Re-
Think” relative to answering
the question of what’s
the (significant) difference
between leadership and
management is managers
have subordinates; leaders
have followers. On the surface
the difference between
the two may appears simplistic.
In practice they are
indeed profound.
The famous business
guru, Peter Drucker, best
defines the difference when
he stated that “Management
is doing things right;
leadership is doing the right
things.” Another analogy
in operational terms is that
strategy is a function of
leadership whereas management
implements strategy.
In the late 70’s I was enlisted
in the Toronto Scottish
Regiment in Canada
reporting to the de facto
Commanding Officer, a
Sergeant Major of official
rank. He was a tough combatant
of Canadian Scottish
lineage. His explanation of
the difference, in military
terms, is most instructive
and relevant to the business
of business. He explained
that military leaders convince
the troops that dying
in battle is a glorious death;
and it’s “my” job (as manager)
to keep you alive. The
analogy interprets leadership
as a “can do” culture
creator whereas management
makes it happen.
Digressing a bit onto the
stage of entertainment, while
staying on point, George C.
Scott in his Academy award
winning role playing the
heroic and most successful
Tank Commander in World
War 2, General George S.
Patton, in addressing the
third Army on march to Nazi
Germany correlates with the
Sergeant Major’s view, but
in more colourful theatrical
words: “No bastard ever won
a war by dying for his country;
We won it by making the
other poor dumb bastard dye
for his country.” Leadership
makes heroes of men; management
makes men heroes.
In business lingo, for example,
outstanding sales performance
is rarely achieved
without heroic feats of salesmanship
- and as every seasoned
sales manager knows,
such feats are usually attained
by a few heroic salesmen/saleswomen.
The Israeli (military) security
machine is arguably
the best in the world. The
famous “Raid on Entebbe”
(1976) rescue by Israeli
commandos of 103 hostages
from a jet airliner killed all
11 terrorists with just one
Israeli commando fatality,
the commanding officer in
charge. Leaders in the Israeli
military lead by example.
They literally lead their
troops into battle. True leaders
say “follow me”; do as I
do not as I say!
The US Marines, Army
Rangers and Navy Seals
training can teach the business
world a lot about effective
leadership and management.
In fact, US military
training philosophies have
permeated the business
world.
One example of this is in
executive development programmes
on team building
and emerging leaders. An
effective how-to technique,
virtually any business can
implement to build teams
and drive potential leaders
to emerge, is the US Marines
“no man left behind”
training philosophy.
CONTINUE ON
PAGE 22