Antigua and Barbuda: De-Risking in Jeopardy 3

Last Updated: 8 November 2019
Article by Ian Moncrief-Scott

Another name now looks like being added to the growing list of banks that have moved to protect their brands and their own institutions by de-risking.

This time Canadian Imperial Bank of Commerce appears to be in the process of shedding CIBC First Caribbean International Bank, which it had formed with Barclays Bank - in 2002. Barclays then moved to protect its brand and interests by shedding the last of its shares and totally withdrawing from the region in 2006.

According to various South American media sources the intention is to dispose of 70% of its shares for US$2.2 billion to the Gilinski Group, a Columbian entity with widespread interests across the zone. This may be the forerunner to CIBC following Barclay Bank's lead by disposing of its risks and liabilities entirely.

On that note, it will be interesting to see how CIBC First Caribbean International Bank and the Canadian Imperial Bank of Commerce report and record the ongoing legal action by H.M.B Holdings Limited relating to the "conspiracy to commit fraud" claim against the Government of Antigua & Barbuda, Replay/Freetown and the First Caribbean International Bank in its current dealings.

CIBC First Caribbean claims to be the largest group in the English / Dutch-speaking Caribbean with more than US$1.2 billion in equity and US$11.5 billion in total assets as at July 2019. The Bank says it has over 2700 employees, 57 branches, 22 banking centres and seven international offices in 16 regional markets.

This acquisition is said to include locations in sixteen Caribbean countries including its headquarters in Barbados and offices in Antigua, Bahamas and Cayman.

Jaime Gilinski is listed as a billionaire banker and real-estate developer, who apparently resides in the United Kingdom and is listed by Forbes as the second richest person in Colombia.

In the 1990s, Gilinski acquired the Colombian assets of the rogue Bank of Credit and Commerce International (BCCI) following its global collapse and through a series of subsequent mergers and acquisitions, has become the main shareholder of Banco Sabadell, which is the 5th largest bank in Spain.

Meanwhile, Sir Ronald Sanders, Antigua & Barbuda's Ambassador to the United States of America and the Organisation of American States, has woken up to the real significance of the loss of correspondent banking as reported in our article dated 10 January 2017, The Death of Correspondent Banking, published by Mondaq.com.

In his article captioned "Business community stands to lose from de-risking" dated 26 October 2019 he recognises that it is ordinary citizens and business that will suffer the consequences. He blames the banks for withdrawing, stating, "Banks are being made to comply by regulatory bodies and Central Banks. All this is necessary to persuade correspondent banks in North America and Europe that there is minimal risk in providing CBR (correspondent banking relationships) to respondent banks in the region. However, compliance with the rules is not enough. Correspondent banks in North America and Europe are also concerned about the huge penalties they might have to pay if any infringement of the law occurs. They believe that the relatively small amount of money they earn from individual Caribbean banks is not worth the risk."

Leaving aside the realistic achievement and enforcement of "compliance" and that, in many of the jurisdictions, it is not obligatory for the "professionals," such as lawyers, estate agents, corporate service providers and accountants, etc. to submit suspicious transaction reports to the authorities/regulators, it is not the "small" amount of money involved. It is the fact that correspondent banks can easily be drawn into adverse situations by facilitating transactions in which appropriate due diligence has not been performed deliberately or because the originating sources do not have sufficient resources to carry out proper checks.

Furthermore, the banks involved look at many other factors such as the country's underlying financial stability, its attitude to governance and its political risks.

Take Antigua & Barbuda, for example. Here is a country that has expropriated privately-owned private property belonging to US investors in order to hand it to a now-jailed fraudster. Having failed to do so, eight years later, and five years ago, it sold the property to a Canadian developer, all the while steadfastly refusing to pay the amount of compensation ordered by Her Majesty's Privy Council and its own Constitution and has used all means possible to defeat the owners' rightful entitlement.

Furthermore, there is unresolved and delayed litigation claiming that the Government of Antigua & Barbuda had conspired with First Caribbean International Bank and private organisations Replay/Freetown. (See "Quagmire of Expropriation" by this author published on Mondaq.com, on 30 October 2019).

Anyone ticking political risk boxes, is going to put a heavy cross next to that country.

Sanders proposes that business and individuals lobby banks and others about the harm being done to get them to change their minds. He argues that, "Caribbean banks should create one or two adequately capitalised entities to act as their collective agent with correspondent banks. In this case, it is truly 'unite or perish.' And, the broader business community should join in. It's in their interest."

This proposal is flawed as the underlying and unresolved issues mentioned in the preceding paragraphs still apply and, of course, anyone participating in the entities suggested would be assessed by the lowest common denominator.

Finally, by way of an update to earlier De-Risking In Jeopardy articles, it has been announced on 26 October 2019 by Prime Minister Gaston Browne that his son, Gaston Andron Browne, has expressed interest in purchasing pre-owned shares in Caribbean Union Bank Limited. In 2016 the Government of Antigua & Barbuda made a US$30 million investment, backed by an 80% shareholding in said bank

The Prime Minister further explained that his 20-something year old son is an adult who is capable of conducting his own transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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