Financial Crime World

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Financial Regulators Issue New Guidelines on Correspondent Banking Relationships

The Financial Services Commission has issued new guidelines aimed at strengthening anti-money laundering and combating the financing of terrorism (AML/CFT) measures in correspondent banking relationships.

Enhanced Customer Due Diligence Procedures

The guidelines, which come into effect immediately, require correspondent banks to conduct enhanced customer due diligence procedures when establishing or maintaining a relationship with a respondent bank. This includes:

  • Verifying the identity of the respondent bank’s customers who have direct access to the correspondent bank’s services
  • Assessing the reputation and quality of supervision of the respondent bank
  • Evaluating its systems and controls to combat money laundering and terrorist financing

Approval Requirements and Documentation

Correspondent banks must also:

  • Require approval from their board before establishing a new correspondent relationship
  • Document the responsibilities of both parties in combating AML/CFT

Enhanced Due Diligence Measures for Higher-Risk Situations

The guidelines introduce enhanced customer due diligence procedures for higher-risk situations, including:

  • Business relationships with persons or institutions from countries that do not fully apply the Financial Action Task Force (FATF) recommendations
  • Politically exposed persons, defined as individuals who hold prominent public functions or are close associates of such individuals

Reduced Due Diligence Measures for Low-Risk Situations

In addition, correspondent banks may reduce customer due diligence procedures in certain low-risk situations, including:

  • Relationships with public authorities acting in their official capacity
  • Pension schemes where contributions are made by way of deductions from wages

Quote from Director-General

“We believe that these guidelines will help to strengthen the financial sector’s ability to combat money laundering and terrorist financing,” said [Name], Director-General of the Financial Services Commission. “We urge all correspondent banks to comply fully with these guidelines to ensure the integrity of our financial system.”

Ongoing Efforts to Implement International Standards

The new guidelines are part of the Commission’s ongoing efforts to implement international AML/CFT standards and to enhance the effectiveness of anti-money laundering measures in St. Christopher and Nevis.