PORT-AU-PRINCE, HAITI. -The year 2022 has been marked by international sanctions against political leaders, former senior state officials, parliamentarians and some of the country’s wealthiest businessmen. The case is not yet closed.

The list of people sanctioned will most likely grow in 2024. And one of the questions that torments the minds of the various economic agents is to know the impact of these sanctions on the Haitian economy in general and on the banking sector in general. particular.

The Governor of the Bank of the Republic of Haiti (BRH), Mr. Jean Baden Dubois, in the context of Leslie Delatour’s interview with our colleague Kesner Pharel on Radio Métropole on January 2, 2023, spoke about the impact of international sanctions on the banking system. sector.

First of all, Mr. Dubois was careful to distinguish bilateral sanctions from multilateral sanctions. These were the first imposed by the United Nations (UN) through resolution 2653 of October 21, 2022. Its scope extends to all UN member countries, including Haiti.

These sanctions are above Haitian laws, including the mother law, the Haitian Constitution, in accordance with the conventions ratified by Haiti. In case of dispute, specifies the governor Dubois, the victims must attack the UN and not the Haitian institutions.

These multilateral sanctions are of greater magnitude. They can even go so far as to freeze the accounts and assets of the persons concerned in all the member countries of the UN. In Haiti, the mechanism is very simple: the list of sanctioned persons reaches the BRH, which redistributes it throughout the financial system which, in turn, will block the accounts. UN sanctions include targeted travel bans, asset freezes and arms embargoes.

As for bilateral sanctions, they only concern the countries that decide on them. To date, the three main issuing countries are England, the United States of America (USA) via the “Office of Foreign Assets Control (OFAC)” and Canada.

These bilateral sanctions are governed by the laws in force in the issuing countries. For example, Canadian sanctions only apply to Canadian jurisdictions, while US OFAC sanctions apply to US jurisdictions, but also to all transactions made in US dollars. The consequences of the sanctions therefore turn out to be different from one country to another.

However, there is a peculiarity in the case of the United States of America since all Haitian commercial banks have correspondent banks in the United States. And according to the US laws that govern the matter, confirms Mr. Dubois, if a correspondent bank of a Haitian bank in the United States agrees to make a transfer of 200 US dollars for one of the customers sanctioned by the United States, this American bank is liable to a fine of one to five million American dollars. It is understood that no US bank will take such an unreasonable risk. He would have preferred to break his relationship with the Haitian bank in question.

For its part, the Haitian bank runs the risk of losing an American correspondent bank which allows it to carry out international transactions for a single client. A scenario she would not tolerate. This is why we have seen Haitian commercial banks close the accounts of certain clients subject to international sanctions.

Commercial banks have the legal provisions to do so since, recalls Mr. Dubois, it is clearly indicated in the bank account opening form that they can terminate their contractual relations with customers at any time.

However, confirms the governor of the central bank, in the event of bilateral sanctions, Haitian banks cannot freeze customer accounts. To avoid suffering the consequences of penalties, they can simply close their accounts and pay the balance to the owner. The same principle applies to companies whose sanctioned clients are majority shareholders.

Sole proprietorships themselves automatically suffer the same fate as their owner. Commercial banks assess the nature of the risks they incur with sanctioned customers on a case-by-case basis according to the degree of importance of these customers. They can, for example.

Jean Baden Dubois affirms that, since the implementation of the first sanctions, the BRH has already met with the leaders of the Haitian commercial banks to explain to them the nature of the sanctions and their impact on their daily operations in order to prevent any abuse of power.

To date, there are around ten people affected by the account closures for a total of around 178 accounts, including 72 individual professional accounts belonging to the people sanctioned, according to information provided by the governor.

She stresses that these people must continue to pay the loans they had contracted with these banks by keeping an open account. Everyone on sanctions lists should be subject to increased scrutiny by financial institutions, Dubois warns.

The governor of the BRH ensures that, for the moment, the sanctions affect less than 500 million gourdes and less than five million US dollars, which, according to him, does not in any way endanger the banking system. However, he admits the UN list, which will most likely be in 2024, can have a much bigger impact.

This list, he says, has only one name at the moment. Therefore, it invites commercial banks to carefully screen their customers to avoid any inconvenience.

The international sanctions and their consequences on Haitian commercial banks come at a time when Haiti was already on the gray list of the Caribbean Financial Action Task Force (FATF). To avoid being blacklisted, Haiti will need to demonstrate good governance and transparency.

For example, a major overhaul of the regulatory framework in Haiti will be required. Among the projects to be put in place, Mr. Dubois mentions the need to have a law on games which establishes, among other things, a tax and controls on these games.

Today, nothing prevents a game owner, or even a simple citizen, from declaring to a commercial bank that he has won x million gourdes in the lottery without rigorously proving it.

Kesner Pharel took the opportunity to ask the governor of the BRH “how is it that such large sums were able to leave Haiti for Canada without any restriction from commercial banks?”

He was no doubt referring to Canadian-sanctioned Haitian officials who had previously purchased luxury homes there. Mr. Dubois’ response suggests that these people were able to take advantage of the shortcomings of the current legal framework. He advocates a law on limited companies as well as a revision of the current law on money laundering to fill the gaps.

These are also conditions imposed by the FATF to remove Haiti from the gray list.
Kesner Pharel also questioned Jean Baden Dubois about a text circulating on social networks which suggests that one of the main Haitian commercial banks is on the verge of bankruptcy.

The governor indicated that the BRH would be the first to know of a commercial bank in financial difficulty, because it regularly receives financial reports. To reassure the general public, he specifies that deposits in gourdes have not decreased in 2022, and that at the same time deposits in US dollars have only decreased by 45 million, an insignificant amount to put the banking system in danger, according to Dubois.