Correspondent Banking Services: Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT)
===============
Assessing Correspondent Banking Risks
Factors Influencing Risk Assessment
- Jurisdiction
- Products/services offered by the respondent institution
- Customer base
- Level or type of residual risk
Key Considerations for Risk Assessment
When evaluating correspondent banking relationships, it’s essential to consider various factors that may impact the level of risk associated with the relationship. This includes assessing the jurisdiction in which the respondent institution operates, as well as the products and services they offer to their customers.
Identifying and Verifying Identity
Importance of Proper Identification
- Verify identity using reliable sources
- Gather information about beneficial owners
When establishing a business relationship with a respondent institution, it’s crucial to properly identify and verify the identity of the institution and its beneficial owners. This involves using reliable sources to confirm their identity and gather information about who holds control over the institution.
Understanding Ownership and Control Structure
Gathering Information on Ownership and Control
- Identify beneficial owner(s)
- Determine if the respondent institution is a shell bank
To fully understand the risks associated with a correspondent banking relationship, it’s essential to gather information about the ownership and control structure of the respondent institution. This includes identifying who holds control over the institution and determining whether they are operating as a shell bank.
Gathering Information on Correspondent Banking Relationship Purpose and Nature
Understanding the Intended Nature of the Relationship
- Gather sufficient information
- Determine types of customers being serviced
- Assess how services will be offered
When establishing a correspondent banking relationship, it’s essential to gather sufficient information about the intended nature of the relationship. This includes determining what types of customers the respondent institution intends to service and assessing how they will offer these services.
Assessing Reputation and Supervision Quality
Evaluating the Respondent Institution’s Reputation
- Determine if subject to a ML/TF investigation or regulatory action
- Evaluate quality of supervision
When evaluating the risks associated with a correspondent banking relationship, it’s essential to assess the reputation of the respondent institution. This includes determining whether they have been subject to a money laundering or terrorism financing (ML/TF) investigation or regulatory action.
Evaluating AML/CFT Controls
Assessing the Respondent Institution’s AML/CFT Framework
- Review systems and controls framework
- Confirm independent audit
- Conduct more detailed review for higher-risk relationships
To fully understand the risks associated with a correspondent banking relationship, it’s essential to evaluate the respondent institution’s anti-money laundering (AML) and combating the financing of terrorism (CFT) controls. This includes reviewing their systems and controls framework, confirming that they are subject to an independent audit, and conducting a more detailed review for higher-risk relationships.
Understanding Service Offering Arrangements
Assessing Nature and Level of Risk Associated with Service Offerings
- Determine how services will be offered
- Assess nature and level of risk associated with service offerings
When evaluating the risks associated with a correspondent banking relationship, it’s essential to understand how the respondent institution will offer services available through the relationship. This includes assessing the nature and level of risk associated with these arrangements.
These guidelines emphasize the importance of thorough due diligence and ongoing monitoring in managing risks related to money laundering and terrorism financing in correspondent banking relationships.