Financial de-risking is a process by which financial institutions terminate or restrict commercial relationships where clients are perceived to be in a high risk category for financial crime, such as money laundering or financing of terrorism. Over the last decade, there has been an increase in foreign banks de-risking in the Caribbean, which has curtailed investment in the region making international trade increasingly difficult and threatening national and regional economies.
To ensure that Caribbean countries grow economically it is critical to engage with international financial systems and comply with the standards and countermeasures to combat financial crime.
The Eastern Caribbean Central Bank (ECCB) is the central bank for the Eastern Caribbean dollar and the monetary authority for eight Caribbean island economies: Anguilla, Antigua and Barbuda, Commonwealth of Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines. The primary objective of the ECCB is to maintain the stability of the Eastern Caribbean Currency and the integrity of the banking system.
Commonwealth Alumnus Louisianne Josiah Roberts is a Bank Examiner at the ECCB. She has worked in financial regulation since 2013 and at ECCB she is responsible for ensuring that financial service providers across the Caribbean are compliant with laws relating to anti-money laundering, counter-financing of terrorism, and counter-proliferation financing.
Ensuring compliance across the Eastern Caribbean Region
Safeguarding the Caribbean’s financial and banking sector against the risk of financial crime is critical for sustaining investment and international trade to grow the region’s economy. If banks and financial institutions in the Caribbean fail to meet international standards and regulations, financial de-risking may produce serious consequences for both the financial sector and the wider economy.
“In order to facilitate trade and to conduct any business on an international level, we must establish relationships with banks in other jurisdictions. There’s a lot of pressure on the Eastern Caribbean Currency states and the Caribbean as a whole to ensure that our financial systems and banks are strong. Unfortunately, if correspondent banks in the other territories are of the opinion that they are not safe, they are not sound, they will end those relationships.”
The Caribbean faces an ongoing battle in tackling financial crime. Developing and maintaining robust anti-money laundering and counter-financing terrorism policies and regulations is crucial for maintaining stability and attracting investors.
Louisianne conducts assessments of the financial institutions operating in the eight countries managed by the ECCB to identify gaps within their systems, laws, and regulations. While each country operates under different financial legislation, they must all comply with international best practices and standards.
“We ensure that whatever legislation is in place, that they [financial institutions] are compliant with it. So, we assess their systems, we interview staff, we identify any existing gaps, and we issue appropriate remedial actions. If they don’t comply, we can levy penalties, which could be as severe as closing a bank, which we have done in the past.”
Following her assessments, Louisianne issues remedial actions and guidance to financial institutions in order to strengthen their operations and, if necessary, recommending to countries the re-drafting of legislation to meet international standards.
One example where countries may differ in their legislation is customer due diligence measures for those seeking to establish business relationships and conducting transactions. Louisianne has found that relevant legislation differs sightly across ECCB jurisdictions and has implications for the application of harmonised due diligence measures and risk assessments. In some instances, the legislative provisions may not fully meet the required international standards.
These discrepancies are likely due to countries interpretation of international recommendations when drafting national anti-money laundering and counter the financing of terrorism legislation. However, where legislation is not fully compliant with international standards, this presents a threat to financial security within the Eastern Caribbean Currency Union. By identifying these discrepancies and gaps, Louisianne can contribute to strengthening financial regulations and governance across the region.
“One of the benefits of working in eight countries is identifying what works better in one jurisdiction and being able to make recommendations in the other jurisdictions in order to not only strengthen existing legislation, but to also increase harmonisation.”
Training and mentoring for regulators
Working with regional and to a lesser extent international financial authorities is another important aspect of Louisianne’s role. She supports the ECCB’s delivery of training and development courses across the Eastern Caribbean Currency Union to ensure that the ECCB’s supervisory approach to financial institutions meets international standards.
In 2020, the ECCB collaborated with the World Bank on a two-year training programme for regulators aimed at implementing effective approaches to risk-based anti-money laundering and counter-financing of terrorism supervision. The programme welcomed regulators from across the Eastern Caribbean Currency Union for a range of sessions on financial regulation and supervision which provided technical assistance to increase regulator competence.
Following the programme, the ECCB initiated the ‘Anti-money laundering and counter-financing of terrorism mentorship programme’ to further support national regulators application of a risk-based supervisory programme and to enhance their overall competence.
Louisianne continues to mentor regulators in the region to ensure they are able to conduct effective risk-based anti-money laundering and counter the financing of terrorism examinations of financial institutions. Accordingly, Louisianne takes an active role in preparing regulators for onsite inspections, joins them while onsite, observes their testing and interview techniques to provide on-the-spot advice and to support best practice. She also uses these opportunities gather feedback from national regulators in the respective jurisdictions on lessons learnt and challenges faced by financial institutions under their remit. She then uses this information to determine whether and how the ECCB’s guidance and feedback to entities could be best communicated to ensure effective implementation.
Louisianne emphasises that both regulators in the Eastern Caribbean Currency Union and the ECCB benefit from these programmes and the relationships that stem from them.
“Given the success of the ECCB’s risk-based anti-money laundering and counter the financing of terrorism supervisory programme, we are able to offer assistance to our colleagues across the Eastern Caribbean Currency Union in order to strengthen their processes.
“I am grateful for the regulators we have worked with, as in some instances they highlighted some of the nuances that existed in the financial sector within their respective countries, that we (the ECCB) a regional level may not have been exposed to. Given their localised knowledge, they were able to offer great insight which have assisted us in strengthening our supervisory programme.”
The mark of success
The success of Louisianne’s training and mentoring intervention was evidenced by the independent review of the Caribbean Financial Action Task Force (CFTAF), which reported that the banking sector within countries under the ECCB’s supervision had robust regulatory programmes and compliance.
The CFTAF assesses countries on their implementation of and compliance with international recommendations to prevent and control money laundering and counter terrorist financing. Each time the CFTAF assess an Eastern Caribbean Country where the ECCB is the Anti-Money Laundering and Counter the Financing of Terrorism Supervisory Authority, they are also assessing the ECCB’s effectiveness.
“You may be doing your best as a bank examiner, thinking that you’re helping the entities, thinking that you’re helping the countries. But how do we really know we’re effective? And that is why it is important that we are assessed by an independent body.”
Louisianne is proud to report that for the last three assessments, the CFTAF has issued a good report, highlighting the impact of regulatory programmes and compliance within its assessment. For Louisianne, this is a positive endorsement of her work and the impact she has made through the ECCB to ensure that financial institutions in the region have a high level of understanding of their responsibilities under international standards.
As an internationally recognised assessment, the CFTAF reports signpost whether counties are safe to do business with. A positive outcome for ECCB countries can therefore increase their prospects for future trade and investment opportunities.
Understanding the regulatory landscape
Prior to her Commonwealth Scholarship, Louisianne supported national financial regulation in her home country of Antigua and Barbuda. Since completing her scholarship, her regulatory remit has significantly expanded in her current role at the ECCB.
Louisianne reflects that her Master’s in Public Administration at the University of Exeter encouraged her to think critically about how governance structures and national policies influence public administration around the world. This experience increased her confidence and competence in policy development, regulation, and reform, and enabled her to develop as a professional and a public servant.
Despite the importance of her work, she acknowledges that anti-money laundering, counter-financing of terrorism, and counter-proliferation financing regulation and compliance are niche specialisms.
“To work in such an area, a person must have relevant qualifications and experience. Not only working in financial services in the past, but they must understand fully the regulatory framework and the mechanics of the financial sector to be able to guide financial institutions and to be able to adequately test their systems. It’s a specialised area.”
The evolution of financial technology, particularly virtual assets such as cryptocurrency, has opened up new opportunities for crime. While there is currently no international regulatory framework for financial technology, Louisianne knows that her unit must take a proactive approach to identifying and understanding the risks and observing global responses as they develop.
International standards and regulations are never static and change regularly. Louisianne has to ensure that financial institutions in the region are aware of the changes and adapt national legislation in a timely and appropriate manner to ensure continued compliance.
“The goalpost is always moving. As soon as we make amendments to adopt new recommendations, international standard setting organisations issue new recommendations or guidance. This means that we must continuously stay abreast of these updates, and make the relevant amendments to national legislation, and update our guidance to financial entities.”
One way in which Louisianne has responded to the changing landscape of international financial regulation is by streamlining information on anti-money laundering and counter-financing of terrorism through a quarterly newsletter to licensed financial institutions and other regulators. This enables the ECCB to communicate regulatory changes efficiently and, by publishing the newsletters on the Central Bank’s website, provide a repository of information on regulations for future use.
Delivering on the international stage
Louisianne’s dream role is to work on an international level contributing her specialist knowledge to enable collaboration and partnerships. She recalls a memory from secondary school when she was asked what she wanted to do in future and how, so far, she is achieving her goal.
“They would have asked, what is it that you want to do? I never particularly knew what I wanted to do, specifically, but I knew that I wanted to work with governments. I always said that, and now that I’m at a regional level, I’m able to serve several countries and work along with respective governments.”
Louisianne Josiah-Roberts is a 2017 Commonwealth Shared Scholar from Antigua and Barbuda. She completed an MPA Public Administration at the University of Exeter.
