1) The document discusses the need for Caribbean banks to establish international correspondent banking relations for trade, connectivity to global markets, and economic survival. However, foreign banks are increasingly wary of the risks associated with relations in higher-risk markets like the Caribbean due to money laundering and terrorist financing regulations. 2) It proposes establishing a shared services gateway for correspondent banking relations between Caribbean banks and foreign banks. This would involve harmonizing standards, vetting all transactions through a compliance clearinghouse, and performing necessary due diligence on each transaction according to regulations. 3) Individual Caribbean countries would still be responsible for adhering to laws and regulations, but the shared services platform would act as a filter, equipped to perform due dilig

1. Creating a Gateway for Caribbean Correspondent Banking Relations
Shared Services
Marcelline Richardson
Ethos Management Services

2. Creating a Gateway for Caribbean Correspondent Banking Relations 2
Shared Services
The foundation of Banking in today’s environment requires as a base for operating that
International Banking Relations be established. This time more than any, we are experiencing a
level of connectivity on the global stage brought about in the first instance through globalization,
but also pushed by the need to survive as a country, to acquire certain goods and services which
are not readily or at all available to individual nations. This movement of goods and services is
facilitated for the most part by technology, acting as the catalyst in support of the provision of
doing business. Of equal importance are the transfers and personal remittances between
companies and individuals in support of trade and the financing of living expenses, the latter not
to be underestimated, since this also has its impact and implications on the economics of most
countries, specific in this case, The Caribbean. The Caribbean Islands need the foreign Banks.
To put the above in perspective, countries will not only have profound setbacks in continuing its
banking operations, this problem touches the more important aspect of survival as a country.
Stop for a moment and take a studied look at your environment. Where did it all come from,
what pathway. What was the transaction necessary to get it to you?
Who were the key intermediaries, who supported this process?
To the Caribbean countries, having a Gateway is critical, necessary, not only for trade, or
connectivity to the global markets but more importantly for survival; the absence of which could
have catastrophic impact on countries. As it currently exists, all Banks operating within the
Caribbean use more than one foreign Bank to assist them with the clearing of transfers, checks,
movements of remittances etc. These correspondent relations are established on a Bank to Bank
basis, with terms and conditions acceptable to all parties. This may call for collateralization on
the part of the Caribbean Bank or some type of investment benefit to the Correspondent Bank,
again as parties see fit and as mutually agreed upon.
In the past, the foreign Banks saw as a strategy the business opportunity in attracting Caribbean
Banks, Banks were actively solicited through this same medium of Correspondent relations.
Now with the advent of Anti-Money Laundering and Combating the Financing of Terrorism and
the need to remain compliant, foreign Banks are weighing the risk associated with continuing in
markets where they may have no direct control in curtailing the risk or potential risk associated
with their relations, with consideration also for the hefty fines which can be imposed in keeping
with the laws as laid down in the regulations. Banks are required to “comply or die’.
While all Banks, domestic or foreign are required to live by the law, as it relates to improving
their internal controls, they need to undertake high level surveillance and know their customers
through active and on-going due diligence based on certain risk profiles. It is also true to say that
since these activities are domestic to each operation, this will then obviously result in each
organization performing or setting the barriers at varying heights. Their level of compliance may

3. Creating a Gateway for Caribbean Correspondent Banking Relations 3
be influenced by, technology, cost of doing business, knowledge and infrastructure, whether
inside or outside of the organization and the actions of the governing or controlling bodies of
each jurisdiction.
It means therefore that foreign banks will actively perform certain due diligence on their
correspondent Caribbean partners. The question that they may continue to ask themselves is
whether they have the whole truth, whether it is enough, or should they run the risk that this
isolated connection, with varying systems and infrastructure, supported by different culture and
management, would not put them at an ongoing risk. There is the possibility that they are not in
a position to actively anticipate let alone, mitigate against such possibilities.
We have already established that the Caribbean Islands need the gateway. What is being made
clear is that the foreign Banks have the power and therefore could decide based on “Strategy”, or
risk assessment, that they want to eliminate all the connections deemed higher than normal risk,
since I am sure that the classification of the Caribbean Relations are categorized High Risk, for
reasons already identified.
Some Caribbean Bank will fare just a bit better than others, if they are supported or backed by
an International connection. For the Banks which are solely local, the issue resonates deeper,
since there exists no support or “Big Brother” to endorse their operations. As mentioned, this
issue goes even further than just the Banking sector, it affects the very fabric of each island
economy, that of growth and stability.
So the question therefore lingers as to how should the Caribbean react to this growing problem.
Foreign Banks are averse to what they may consider to be risky business. Certain structures and
mechanisms have to be in place as a definitive requisite. These include an approved structure,
process, requirement, system, harmonization, in keeping with the law, in common and acceptable
to the correspondent relation, with one point of control, audit and correspondence. Once these
are realized they may alleviate the doubt, consolidate the discussion, actions and decision
making.
Such a structure needs to be established based on the concept of Shared Services, under a joint
initiative with the foreign Banks. It further needs to be restricted to chosen Caribbean States,
through a pre-qualification process. It could then be a possible solution, in terms of harmonizing,
standardizing and vetting all transactions and movements through this Shared Service gateway.
This concept being a sough of compliance clearing house, only for the movement of the funds,
supported by the necessary due diligence to be established for each transaction and in keeping
with the laws.

4. Creating a Gateway for Caribbean Correspondent Banking Relations 4
The question deals with risk and responsibility in each Island state, and whether the individual
island would be released from their lawful responsibility as it relates to compliance and adhering
to the law.
The answer will be “no.”
The Shared Service Platform will act as a gateway, and also a filter, since it should be equipped
with the best platform for performing the due diligence, accessible to each island, staffed with
the qualified professionals and supported equally by qualified professionals within each
jurisdiction.
This link or Shared Service Concept will be a legal structure, supported and funded by each
contributing island states, in close association with the Foreign correspondent relation or
representative.
It is evident that this situation requires a global and consolidated solution. It should involve the
coming together of minds, including and involving business, governments local as well as
international central banks These entities need to work toward a common platform for
compliance, while continuing to facilitate business.
Glimpse into (Part 2)
What should such a structure and composition look like?