BSA/AML Examination Manual - ffiec

Correspondent Accounts (Foreign) — Overview
Correspondent Accounts (Foreign) —
Overview
Objective. Assess the adequacy of the U.S. bank’s systems to manage the risks
associated with foreign correspondent banking and management’s ability to implement
effective due diligence, monitoring, and reporting systems. This section expands the
earlier core review of statutory and regulatory requirements of foreign correspondent
account relationships in order to provide a broader assessment of the AML risks
associated with this activity.
Foreign financial institutions maintain accounts at U.S. banks to gain access to the U.S.
financial system and to take advantage of services and products that may not be available
in the foreign financial institution’s jurisdiction. These services may be performed more
economically or efficiently by the U.S. bank or may be necessary for other reasons, such
as the facilitation of international trade. Services may include:
• Cash management services, including deposit accounts.
• International funds transfers.
• Check clearing.
• Payable through accounts.
• Pouch activities.
• Foreign exchange services.
• Overnight investment accounts (sweep accounts).
• Loans and letters of credit.
Contractual Agreements
Each relationship that a U.S. bank has with a foreign correspondent financial institution
should be governed by an agreement or a contract describing each party’s responsibilities
and other relationship details (e.g., products and services provided, acceptance of
deposits, clearing of items, forms of payment, and acceptable forms of endorsement).
The agreement or contract should also consider the foreign financial institution’s AML
regulatory requirements, customer base, due diligence procedures, and permitted thirdparty
usage of the correspondent account.
Risk Factors
Some foreign financial institutions are not subject to the same or similar regulatory
guidelines as U.S. banks; therefore, these foreign institutions may pose a higher money
laundering risk to their respective U.S. bank correspondent(s). Investigations have
FFIEC BSA/AML Examination Manual 170 8/24/2007