Office of the Comptroller of the Currency’s Guidance on Account Termination Practices

Risk-Based Approach to Account Terminations

The Office of the Comptroller of the Currency (OCC) emphasizes the importance of a risk-based approach when making decisions about account terminations for foreign correspondent accounts. This approach involves analyzing individual risks and assessing a bank’s ability to manage those risks.

Key Considerations

• A thorough analysis of risks presented by individual foreign financial institutions
• The bank’s ability to manage those risks effectively

Best Practices for Account Termination Decisions

The OCC recommends that banks establish an effective governance function to ensure sound account termination practices. This includes:

• Risk Reevaluation Methods: Regularly reviewing and updating risk assessment methods to reflect changes in the banking environment
• Customer Due Diligence: Monitoring customer due diligence to identify potential risks or concerns
• Communication with Senior Management: Clearly communicating account termination decisions to senior management
• Audit Trail: Maintaining a clear audit trail of reasons for account closure

Risk Assessment for Account Retention or Termination Decisions

Banks should consider the following factors when making account retention or termination decisions:

• The level of risk their systems and controls are designed to manage or mitigate
• The strength of their systems and controls
• Specific foreign financial institution attributes, such as:
  • Country risks
  • Financial stability
  • Compliance with anti-money laundering regulations

By adopting a risk-based approach and following these guidelines, banks can ensure that account terminations are informed and effective.