LATIN AMERICA ADVISOR FINANCIAL SERVICES ADVISOR A PUBLICATION OF THE DIALOGUE www.thedialogue.org May 5-18, 2016 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Ernesto Armenteros Vice Chairman of the Board, MONEY LAUNDERING Banco de Ahorro y Crédito Unión How Are Stricter Pablo Barahona Authorities COO, Latin America & Continental Target Alleged Europe, Liberty International Rules Affecting Laundering Ring Richard Child CEO, Authorities arrested a prominent Mattrix Group Caribbean Banks? Panamanian businessman and Michael Diaz Jr. dismantled a network of compa- Partner, nies that was allegedly part of a Diaz, Reus & Targ, LLP major money-laundering ring. Ernesto Fernández Holmann Page 2 Chairman of the Board, Ayucus Rich Fogarty INSURANCE Managing Director, Berkeley Research Group Axa Predicting Desiree Green Double-Digit Vice President, Growth in Brazil’s International Government Affairs, Prudential Financial Insurance Sector Earl Jarrett The French insurer expects the General Manager, U.S. policies have led several banks to sever correspondent relationships with banks in the industry to post strong growth Jamaica National Building Society Caribbean, Earl Jarrett says below. // File Photo: TastyCakes via Creative Commons. in the years ahead despite the Thomas J. Mackell, Jr. country’s deep recession. Former Chairman of the Board, Federal Reserve Bank of Richmond Caribbean leaders, including the prime ministers of Trinidad Page 3 Thomas Morante & Tobago and the president of Guyana, met earlier this Partner, month in Washington with U.S. Vice President Joe Biden. FINANCIAL SERVICES Holland & Knight Q Ahead of the meeting, the visitors expressed concerns that David Olivares Itaú’s Goldfajn Senior Credit Offi cer, some U.S. banks were severing ties with banks in the Caribbean due to Tapped to Latin America Banking fears about fi nes and higher costs because of increased U.S. oversight Moody’s Investors Service Head Brazilian of money laundering in the area. What effects are U.S. compliance Manuel Orozco Central Bank Director, regulations having on Caribbean banks? How has the de-risking trend Migration, Remittances & Development, Itaú Unibanco’s chief economist, Inter-American Dialogue affected non-banking fi nancial institutions in the Caribbean basin? Are Ilan Goldfajn, was named head of Adalberto Palma-Gomez the U.S. regulations appropriate, or are they causing an undue burden the country’s central bank. Gold- Senior Partner, on companies and their customers? How will new transparency rules, fajn previously served as central Proxy, Gobernanza Corporativa bank chief under former President announced May 5 by the Obama administration requiring fi nancial insti- Rodolfo Pittaluga Fernando Henrique Cardoso. Retired Principal, tutions to know the true owners of accounts, affect U.S. and Caribbean Page 2 Deloitte Financial banking relationships? Advisory Services, LLC Jan Smith Partner, Earl Jarrett, member of the Financial Services Advisor board KoreFusion and general manager of the Jamaica National Building So- Roberto Teixeira da Costa Board Member, ciety: “The U.S. Treasury’s policies and tactics have had the SulAmérica unintended consequence of banks de-risking their operations Mario Trujillo A CEO, by severing correspondent account relationships with several banks in the DolEx Dollar Express Caribbean region. Many of the region’s banks are fearful that, should the trend continue, Caribbean countries could be locked out of the interna- tional payment system, as more than 37 fi nancial institutions have had their accounts restricted or terminated. Remittance companies have also been severely affected, resulting in the closure of businesses or signifi - cant changes in business practices. This includes shipping U.S. currency Goldfajn // File Photo: Brazilian Government. Continued on page 3 COPYRIGHT © 2016, INTER-AMERICAN DIALOGUE PAGE 1 FINANCIAL SERVICES ADVISOR May 5-18, 2016 REMITTANCES NEWS ANTI-MONEY LAUNDERING NEWS NEWS BRIEFS Curbing Remittances Authorities Target Goldfajn Tapped to Head Would Harm Anti- Alleged Panama Brazil’s Central Bank Newly appointed Brazilian Finance Minister Laundering Eff orts: Laundering Ring Henrique Meirelles on Tuesday nominated Ilan Goldfajn as the next president of Brazil’s Mexican Offi cial In a coordinated effort between the United central bank, The Wall Street Journal reported. States, Panama and Colombia, authorities have Goldfajn is currently the chief economist for Any attempt by a new U.S. administration to arrested a prominent Panamanian business- Itaú Unibanco, Brazil’s largest private-sector curb the fl ow of remittances from the United man and dismantled a network of companies bank by assets. He was also the director of the States to Mexico would translate into a major that U.S. offi cials allege were part of a major central bank from 2000 to 2003 under Presi- setback in the countries’ joint efforts to stop money laundering ring for drug traffi ckers. In a dent Fernando Henrique Cardoso. The Senate statement May 5, the U.S. Treasury’s Depart- must confi rm Goldfajn’s nomination before he ment of Foreign Assets Control, or OFAC, may take offi ce. announced sanctions against Nidal Waked and his uncle Abdul Waked as well as six other associates of the men and 68 companies tied Caixa Econômica Federal to what OFAC called a “drug money laundering Won’t Need Capital network.” The network “uses trade-based mon- ey laundering schemes, such as false commer- Increase: CFO cial invoicing; bulk cash smuggling; and other Aportela // File Photo: Twitter. Brazil’s largest mortgage lender, state-run money laundering methods, to launder drug bank Caixa Econômica Federal, will not need money laundering and other illicit forms proceeds on behalf of multiple international a capital injection, a senior executive told of fi nance, Mexico’s deputy secretary for drug traffi ckers and their organizations,” OFAC Reuters May 9 after the bank reported a 46 per- fi nance said May 12, the Los Angeles Times cent drop in net income as delinquency rates reported. Fernando Aportela also warned increased, Reuters reported. Caixa reported a that any attempt to seize remittances would The Treasury froze quarterly profi t of $235 million, and its delin- force Mexicans to hide and smuggle money, the U.S. assets of 68 quency rose to 3.51 percent from 2.85 percent undermining the strides the two countries have companies involved a year ago. The bank’s return on equity fell to made in making money fl ows more transpar- 10.3 percent from 13.7 percent a year earlier ent. “We will end up getting less information” in the case. as well, causing some analysts to wonder if the to work with instead of more, Aportela said at bank will need fresh capital. Chief Financial Of- the Wilson Center in Washington. “It will create said. As part of the sanctions, the Treasury fi cer Márcio Percival said the 90-day delinquen- [new] challenges.” U.S. presidential candidate froze the U.S. assets of the 68 companies. cy rate could reach 3.8 percent by the end of and presumptive Republican nominee Donald Nidal Waked was arrested May 4 at an airport the year, but added the bank would make up for Trump has vowed that if elected, he would in Bogotá, just after clearing customs follow- losses by implementing higher interest rates on force Mexico to pay for building a wall at the ing his arrival on a Copa Airlines fl ight, the its credit portfolio. border between the two countries and would Associated Press reported. He and his uncle impound remittance payments if the Mexican are accused of being the ringleaders of the government did not comply. Mexican offi cials organization, which is alleged to have used a have repeatedly rejected Trump’s pledge, say- bank—Balboa Bank & Trust—as well as a luxury Costa Rica Planning Tax ing they have no intention of building or paying mall and the duty-free zone at Panama City’s in- on ATM Transactions for a border wall. A Trump administration could ternational airport to launder drug profi ts. The potentially impose regulatory and logistical family also owns the Estrella de Panama, the Costa Rica’s government is planning to impose obstacles to sending remittances to Mexico, Central American country’s largest newspaper. a new tax on ATM transactions of more than much in the way the United States has done The family’s holding company, Grupo Wisa, 100,000 colones ($187), local newspaper El to impede terrorism fi nancing. However, doing issued a statement Thursday calling the allega- Mundo reported May 13. The tax would amount so would likely be met with challenges in the tions “false and unfounded,” the AP reported. to 0.02 percent of the transaction amount, said courts and resistance from banks. The company added that it had instructed its legislator Otto Guevara, who opposes the tax. COPYRIGHT © 2016, INTER-AMERICAN DIALOGUE PAGE 2 FINANCIAL SERVICES ADVISOR May 5-18, 2016 lawyers to cooperate fully in an investigation FEATURED Q&A / Continued from page 1 that was announced by Panamanian Attorney General Kenia Porcell Díaz. “We are cooperat- around the region or negotiating non-bank and foreign countries are concerned that ing fully with U.S. authorities in this matter, and settlement options to facilitate remittance the traditional shell company may be that we will ensure justice is served by the people payments. These non-bank alternatives gold that is gone forever. The Panama of Panama. This investigation further strength- expose the region to greater risk of money Papers revealed what many already knew: ens our efforts and resolve to vigorously attack laundering as the transparency offered by that shell companies are used frequently for criminal activity in Panama so that the rule of correspondent banking relationships is both legal and illegal purposes. Recently, law prevails,” Porcell Díaz said in a statement. substituted for less formal payment and the U.S.