Guidance on Evaluating and Managing Foreign Correspondent Account Relationships

Office of the Comptroller of the Currency (OCC) Best Practices

As part of its commitment to ensuring the stability and integrity of the US banking system, the OCC provides guidance for banks to follow when evaluating and managing foreign correspondent account relationships. This article outlines key best practices for banks to consider when making decisions about these accounts.

Key Considerations for Account Termination Decisions

When determining whether to terminate a foreign correspondent account, banks should focus on risk assessment rather than categorically closing all such accounts. The following factors should be taken into consideration:

• Risk Reevaluation: Regularly review the risks presented by individual foreign financial institutions and the bank’s ability to manage those risks.
• Account Termination Decisions: Banks should consider terminating accounts based on risk assessment, not categorically.

Best Practices for Managing Foreign Correspondent Accounts

To ensure effective management of foreign correspondent accounts, banks should follow these best practices:

Establish an Effective Governance Function

• Set up a governance function to monitor account retention or termination decisions.
• Ensure that this function is responsible for regularly reviewing and updating risk assessments.

Communicate Account Termination Decisions

• Regularly communicate account termination decisions to senior management.
• Provide clear reasons for account closure.

Engage with Foreign Financial Institutions

• Consider specific mitigating information provided by foreign financial institutions when making account closure decisions.
• Ensure that all communication is transparent and well-documented.

Maintain a Clear Audit Trail

• Document the reasons and methods used for account closure.
• Maintain an audit trail of all relevant communications and decision-making processes.