Risks Associated with Money Laundering and Terrorist Financing


Correspondent Accounts (Foreign)

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.

1. Review the policies, procedures, and processes related to foreign correspondent financial institution account relationships. Evaluate the adequacy of the policies, procedures, and processes. Assess whether the controls are adequate to reasonably protect the U.S. bank from money laundering and terrorist financing.

2. From a review of MIS and internal risk-rating factors, determine whether the U.S. bank effectively identifies and monitors foreign correspondent financial institution account relationships, particularly those that pose a higher risk for money laundering.

3. If the U.S. bank has a standardized foreign correspondent agreement, review a sample agreement to determine whether each party’s responsibilities, products, and services provided, and allowable third party usage of the correspondent account, are covered under the contractual arrangement. If the U.S. bank does not have a standardized agreement, refer to the transaction testing examination procedures.

4. Determine whether the U.S. bank’s system for monitoring foreign correspondent financial institution account relationships for suspicious activities, and for reporting suspicious activities, is adequate given the U.S. bank’s size, complexity, location, and types of customer relationships.

5. If appropriate, refer to the core examination procedures, " Office of Foreign Assets Control." page 152, for guidance.

Transaction Testing

6. On the basis of the U.S. bank’s risk assessment of its foreign correspondent activities, as well as prior examination and audit reports, select a sample of higher-risk foreign correspondent financial institution account relationships. The higher-risk sample should include relationships with foreign financial institutions located in jurisdictions that do not cooperate with international AML efforts and in other jurisdictions that the U.S. bank has determined pose a higher risk. From the sample selected, perform the following examination procedures:

  • Review a foreign correspondent agreement or contract that delineates each party’s responsibilities and the products and services provided.
  • Review U.S. bank statements for foreign correspondent accounts and, as necessary, specific transaction details. Compare expected transactions with actual activity.
  • Determine whether actual activity is consistent with the nature of the customer’s business. Identify any unusual or suspicious activity.
  • Review large or unusual transactions to determine their nature. As necessary, obtain and review copies of credit or debit advices, general ledger tickets, and other supporting documentation.
  • Analyze transactions to identify behavior indicative of nested accounts, intermediary or clearing agent services, or other services for third-party foreign financial institutions that have not been clearly identified.

7. On the basis of examination procedures completed, including transaction testing, form a conclusion about the adequacy of policies, procedures, and processes associated with foreign correspondent financial institution relationships.


< Previous Page
Correspondent Accounts (Foreign)
Next Page >
Bulk Shipments of Currency