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Correspondent Banking Relationships in High-Risk Countries: A Growing Concern

The global fight against money laundering and terrorist financing has led to increased scrutiny on correspondent banking relationships, particularly those involving high-risk countries. In a recent move, regulators have emphasized the importance of effective customer due diligence measures to mitigate these risks.

Third-Party Reliance

Section 4-12 of the Anti-Money Laundering Act highlights the limitations on relying on third-party customer due diligence measures performed by other enterprises in the provision of gambling services.
While providers of gambling services may rely on such measures, they must still ensure that their own risk assessment and ongoing monitoring processes are robust.

Partial Termination and Blocking

Section 4-13 allows obliged entities to partially terminate a customer relationship by restricting or blocking specific products and services related to the customer due diligence measures that cannot be applied.
This provision aims to prevent potential risks associated with maintaining relationships with high-risk customers.

The General Data Protection Regulation (GDPR) sets out strict rules for the processing of personal data, including requirements for consent, transparency, and security.
Section 6-1 of the Anti-Money Laundering Act emphasizes the importance of having procedures in place to process personal data necessary for anti-money laundering purposes.

Intragroup Information Exchange

Section 6-5 permits intragroup exchange of information between group companies, subject to certain conditions.
This provision aims to facilitate cooperation and sharing of best practices among group members to combat money laundering and terrorist financing risks.

Consequences of Non-Compliance

The consequences of non-compliance with these regulations are severe.
- Financial institutions that fail to implement effective customer due diligence measures or retain information in breach of the retention period may face significant fines, reputational damage, and even loss of licenses.

Conclusion

The increasing emphasis on correspondent banking relationships in high-risk countries highlights the need for financial institutions to prioritize effective customer due diligence measures, ongoing monitoring, and robust risk assessment processes. Failure to do so can result in severe consequences, including regulatory action and reputational harm. As the fight against money laundering and terrorist financing continues, it is essential that financial institutions remain vigilant and proactive in their efforts to mitigate these risks.

Sources

Anti-Money Laundering Act
General Data Protection Regulation (GDPR)
Financial Action Task Force (FATF) Recommendations

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Editor’s Note

This article is based on publicly available information and does not constitute legal advice. Readers are advised to consult with relevant authorities and experts for specific guidance on correspondent banking relationships in high-risk countries.