The Business of Correspondent Banking

An article published by the Money Laundering Bulletin gives interesting insight into the issue of correspondent banking relationships (CBRs), some of the key points are:

  1. The Director for BSA/AML Policy, Office of the Comptroller of the Currency, Spencer Doak advised that correspondent banks need to evaluate whether an account is within their risk appetite, and respondents need to give a level of comfort to their correspondent banks by ensuring business which goes through the account is legitimate.
  2. Correspondent’s banks feel that the OCC guidelines published in October, 2016 are an encroachment on their commercial right to decide who to do business with.
  3. US Treasury believes there is no “Silver Bullet” to solve the CBR issue, however, a twin approach of clarity in regulations and technical assistance to enhance AML/CFT in vulnerable regions would be beneficial.
  4. US correspondents claim that they no longer see CBRs as simply selling a product, but rather as a partnership between the respondent and the correspondent. One Correspondent bank stated that they maintain strong ongoing monitoring systems on respondent accounts, particularly those in risky industries. The volume of SARs or  activity on these accounts are closely monitored and a detailed document trail is kept.
  5. Requests for information (RFIs) are usually issued by the CB to the respondent bank concerning questionable accounts. The timeliness and quality of the responses have an impact on the respondents’ “record”.
  6. The correspondent may inquire of the respondent to recount a success story in AML/CFT in an effort to “develop a spirit of partnership”.
  7. A good bank with a robust AML structure in a poorly supervised jurisdiction will still carry a high risk rating.
  8. One correspondent bank said that they bank some MSBs and risky respondent banks simply to support financial inclusion because they think it’s the right thing to do. They argued that regardless of this, “No one would ever congratulate us for banking some banks in the Caribbean or in Central America that really contribute to financial inclusion.”

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