The Financial Action Task Force (FATF) has published guidance on correspondent banking services. The guidance should be read in conjunction with the FATF Recommendations, especially Recommendations 1, 6, 7, 10, 11, 13, 14, 16, 20 and 26, their interpretative notes and the glossary.
The guidance should also be read in conjunction with certain other FATF guidance papers and typologies reports which relate to the proper implementation of the risk-based approach (RBA) in the banking and money or value transfer sectors (MVTS):
- FATF RBA guidance for the banking sector (2014);
- FATF RBA guidance for money or value transfer services (2016);
- guidance on the RBA for effective supervision and enforcement by anti-money laundering / counter the financing of terrorism (AML / CFT) supervisors of the financial sector and law enforcement (2015);
- FATF guidance on AML / CFT and financial inclusion (2013);
- FATF guidance on politically exposed persons (2013);
- FATF report on money laundering through money remittance and currency exchange providers (2010); and
- FATF report on the role of Hawala and other similar service providers in money laundering and terrorist financing (2013).
The guidance states that correspondent banking is an activity that has been negatively impacted by de-risking in certain regions and sectors. Therefore the purpose of the guidance is to address de-risking by clarifying the application of the FATF standards in the context of correspondent banking relationships and MVTS providers by:
- supporting the development of a common understanding of what the RBA entails for banks engaged in correspondent banking activity and MVTS providers rendering similar services; respondent institutions with MVTS providers as customers; and financial institutions relying on third-party MVTS providers, in their role as intermediaries, to execute payment transactions;
- clarifying the interplay between the FATF standards on cross-border correspondent banking (Recommendation 13) and MVTS providers acting as intermediaries, and the FATF standards on customer due diligence (Recommendation 10) and wire transfers (Recommendation 16), as well as on targeted financial sanctions (Recommendations 6 and 7);
- highlighting the extent to which correspondent institutions and MVTS providers offering similar services may gain a sufficient understanding of the customers of the respondent institutions and the associated risks; and
- clarifying the expectations for correspondent institutions when dealing with respondents whose customer bases include MVTS providers.
The guidance draws on the experiences of countries and of the private sector to assist competent authorities and financial institutions in effectively implementing the applicable FATF Recommendations using the RBA to avoid the unintended consequences of de-risking.
The guidance is non-binding and does not overrule the purview of national authorities to, among other things, assess and regulate correspondent banking activities and MVTS sectors as per the legal, supervisory and regulatory frameworks established in each country and / or region, the ML / CFT risks present in each jurisdiction, individual institution’s risk assessments and other contextual factors (for example the maturity of the national regulatory and supervisory regime).
View FATF guidance on correspondent banking services, 24 October 2016