Bank of America cancels Belize correspondent banking operation

Monday, 27 April 2015

Bank of America has cancelled its correspondent banking operation with the domestic and international branches of Belize Bank.

This appears to be the result of a 'de-risking' strategy forced on the US banking industry by federal regulators. A recent US government report identified over 60 countries (including several jurisdictions in the Caribbean region) as 'countries of primary concern' for money laundering and financial crimes (US Department of State's International Narcotics Control Strategy Report).

Bank of America is the US' second largest bank and its announcement is the most significant so far. Following an unfavourable risk audit, it will terminate its correspondent relationship with Belize Bank from 30 April. After that date, Belize Bank will no longer be able to execute international wire transfers and bank drafts in US dollars – a considerable loss, as it is the country's largest bank, controlling about half the local banking sector, and it has a large corporate presence.

The Belize central bank's Governor Glenford Ysaguirre told the local press that Bank of America's de-risking decision was 'not an issue with the jurisdiction of Belize', and that several banks across the Caribbean, are suffering the same fate.

Two weeks ago Belize's Prime Minister Dean Barrow told the Summit of the Americas meeting that US de-risking was causing a crisis in the Eastern Caribbean. He said the region's financial and trade architecture 'cannot survive' the withdrawal of US correspondent relationships, which are vital to the transaction of international business.

Now the Belize authorities and their regional partners are conducting diplomatic talks with the US authorities and financial institutions, warning them of the disruptive effects of de-risking on small, trade-dependent economies.

At the same time, Belize Bank is looking for a new correspondent banking partner, and expects to have one set up in three months, said group chief executive Lyndon Guiseppi. 'We are in advanced discussions with several US, European and Asian banks and are confident that we will establish a new correspondent banking relationship within a reasonable timeframe'. In the meantime the bank's clients are being offered 'alternative options', and Belize's other domestic banks – ScotiaBank Belize, Atlantic, First Caribbean and Heritage – are not affected. All are authorised by the Belize Central Bank to deal in foreign exchange by wire transfers, bank drafts, letters of credit and bank guarantees.

  • Bodies such as the US Treasury's Financial Crimes Enforcement Network (FinCEN) and the New York State Department of Finance have recently imposed large penalties or sanctions on some banks for infractions connected with the recent financial crisis, as well as money laundering irregularities and violations of political embargoes. These sanctions can, in practice, be imposed on foreign banks as well as US ones.
  • In March, FinCEN announced it was blocking Banca Privada d'Andorra's US correspondent accounts, on the grounds that the bank assisted money laundering.



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