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Correspondent Account Due Diligence and Suspicious Activity Reporting Requirements

By [Your Name], Correspondent

A new advisory from the Financial Crimes Enforcement Network (FinCEN) highlights the importance of correspondent account due diligence and suspicious activity reporting requirements for financial institutions. The advisory emphasizes the need to identify and prevent use of correspondent accounts by North Korean financial institutions or Bank of Dandong.

Identifying Use of Correspondent Accounts

According to FinCEN, covered financial institutions must take reasonable steps to identify any use of their foreign correspondent accounts by a North Korean financial institution or Bank of Dandong, to the extent that such use can be determined from transactional records maintained in the normal course of business. Institutions are also required to take a risk-based approach when deciding what additional due diligence measures are necessary to guard against such use.

Preventing Use of Correspondent Accounts

If a financial institution knows or has reason to believe that a foreign bank’s correspondent account has been or is being used to process transactions involving a North Korean financial institution or Bank of Dandong, it must take all appropriate steps to further investigate and prevent such access. This includes notification of its correspondent account holder and, where necessary, termination of the correspondent account.

Suspicious Activity Reporting

The advisory also emphasizes the importance of suspicious activity reporting. If a financial institution knows, suspects, or has reason to suspect that a transaction has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, it should file a Suspicious Activity Report (SAR).

Evaluating Potential Suspicious Transactions

When evaluating potential suspicious transactions, institutions are encouraged to consider indicators of potential North Korean-related illicit activity in combination with other red flags and factors before making determinations of suspiciousness. They may also want to reference previous FinCEN advisories and guidance related to the Democratic People’s Republic of Korea (DPRK).

The advisory encourages financial institutions to share information with one another, as appropriate, either for the purposes of filing a joint SAR or under Section 314(b) of the USA PATRIOT Act. This voluntary information sharing mechanism allows financial institutions to share information regarding possible terrorist activity or money laundering and provides them with a safe harbor from liability.

Further Guidance

For further guidance on these requirements, financial institutions can contact the FinCEN Resource Center at FRC@fincen.gov.

Sources

31 CFR § 1010.659(b)(3)(i)(A) and (B)
31 CFR § 1010.660(b)(3)(i)(A) and (B)
FinCEN Advisory FIN-2013-A005
FinCEN Advisory – Issue 40
Section 314(b) of the USA PATRIOT Act

Contact

For additional information or comments, please contact the FinCEN Resource Center at FRC@fincen.gov.