Enhanced Due Diligence for Correspondent Banking Relationships
The Superintendence of Banks (SIB) in the Dominican Republic has introduced enhanced due diligence measures for correspondent banking relationships to combat money laundering and terrorist financing. These new regulations aim to ensure that banks exercise greater caution when dealing with politically exposed persons (PEPs) and correspondent banks.
Requirements for Correspondent Banking Relationships
Correspondent banks are required to perform enhanced due diligence on PEPs, including:
- Verifying the source of wealth
- Verifying reputation
- Investigating recent changes in ownership
- Investigating the experience and competency of each member of the executive commission
- Investigating recent changes in the structure of the Directorate
Monitoring and Reporting
Financial institutions are obligated to continuously monitor their correspondent banking relationships and report any suspicious transactions to the Financial Analysis Unit (UAF). Reports must be made using specific forms, such as the IF01 form for cash transactions exceeding USD10,000.
Data Protection Laws
The Dominican Republic’s Data Protection Law regulates personal data processing and does not cover direct information about Know Your Customer (KYC) files. However, the law requires comprehensive protection of personal data in files, public records, and other technical means of processing.
Risk-Based Approach
The SIB promotes a risk-based approach to AML/CFT compliance, which involves identifying and assessing risks associated with correspondent banking relationships. This approach enables financial institutions to focus their efforts on high-risk customers and transactions.
Impact on Transfer of Information
Financial institutions should be aware that the transfer of information to the Dominican Republic may be subject to specific laws and regulations, such as:
- Law 172-13 of Personal Data Protection
- Article 56, Paragraph b) of the Monetary and Financial Law No. 183-02 (banking secrecy and confidentiality)
Conclusion
The enhanced due diligence measures for correspondent banking relationships introduced by the SIB aim to ensure that banks exercise greater caution when dealing with PEPs and correspondent banks. Financial institutions must continuously monitor their relationships and report any suspicious transactions to the UAF. The risk-based approach promoted by the SIB enables financial institutions to focus their efforts on high-risk customers and transactions.
Recommendations
Before opening an account:
- Perform enhanced due diligence on PEPs
- Verify the source of wealth, reputation, and recent changes in ownership
- Investigate the experience and competency of each member of the executive commission and recent changes in the structure of the Directorate
When monitoring correspondent banking relationships:
- Continuously monitor high-risk customers and transactions
- Report any suspicious transactions to the UAF using specific forms
When transferring information to the Dominican Republic:
- Be aware of specific laws and regulations that may impact the transfer, such as Law 172-13 of Personal Data Protection and Article 56, Paragraph b) of the Monetary and Financial Law No. 183-02
- Ensure compliance with data protection laws and regulations