Banks Ordered to Enhance Due Diligence on Charities, NGOs, and Correspondent Banking
In a move to strengthen anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, banks and depository institutions have been directed to enhance their due diligence measures when dealing with charities, non-governmental organizations (NGOs), and correspondent banking.
Enhanced Due Diligence Requirements
The new regulations require banks to conduct enhanced due diligence on charities, NGOs, and correspondent banks to ensure that these entities are not linked to any proscribed or designated persons or entities. This includes:
- Verifying the identity of individuals authorized to operate accounts and members of their governing bodies
- Ensuring that they are not affiliated with any sanctioned entities
Comprehensive Assessments of Controls
The regulations also require banks to conduct comprehensive assessments of controls on asset products and related customers to ensure effective implementation of due diligence requirements. Additionally, banks must apply enhanced due diligence to business relationships and transactions with natural and legal persons from jurisdictions identified by the Financial Action Task Force (FATF).
Correspondent Banking Requirements
Regarding correspondent banking, banks are required to:
- Assess the suitability of respondent banks by gathering adequate information about their business activities, management, and ownership structure
- Determine the reputation of the respondent bank and assess its quality of supervision over AML/CFT measures
- Clearly understand and document the respective AML/CFT responsibilities of each party involved in correspondent banking relationships
Senior management approval is also required before establishing new correspondent banking relationships.
Transparency in Correspondent Banking Relationships
The regulations emphasize the importance of transparency in correspondent banking relationships, requiring banks to clearly understand and document the respective AML/CFT responsibilities of each party involved. Banks must also review existing relationships with NGOs, NPOs, and charities to ensure that they are not linked to any proscribed or designated entities.
Prohibition on Personal Accounts for Charity Purposes
In a related development, banks have been prohibited from allowing personal accounts to be used for charity purposes or collection of donations.
Implementation Timeline
The regulations will come into effect immediately, and banks are expected to implement these measures within the next [insert timeframe]. Failure to comply may result in penalties and reputational damage.
Key Takeaways:
- Banks must conduct enhanced due diligence on charities, NGOs, and correspondent banks
- Banks must verify the identity of individuals authorized to operate accounts and members of their governing bodies
- Banks must assess the suitability of respondent banks before establishing new correspondent banking relationships
- Personal accounts cannot be used for charity purposes or collection of donations
- Existing relationships with NGOs, NPOs, and charities must be reviewed and monitored regularly
By implementing these measures, banks can prevent the misuse of charitable organizations and correspondent banking services for illicit activities such as money laundering and terrorist financing.