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US Explains Correspondent Banking Due Diligence Expectations

by Mike Godfrey, Lowtax.net, Washington
31 August, 2016

The US Government has issued comprehensive guidance in the area of correspondent banking on the expectations of US regulators, the supervisory examination process, and the use of enforcement actions.

On August 30, the US Department of the Treasury released a Joint Fact Sheet on Foreign Correspondent Banking developed with the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency that outlines supervisory and enforcement processes with respect to anti-money laundering and sanctions in the area of correspondent banking.

The document will be of particular interest to regulators and financial institutions in Caribbean states, which have expressed concerns about the significant decline in correspondent banking relationships for their offshore banks as a result of international banks' "de-risking" efforts.

The Fact Sheet says: The global financial system, trade flows, and economic development rely on correspondent banking relationships. To protect this system from abuse, US financial institutions must comply with national anti-money laundering (AML) and countering the financing of terrorism requirements set forth in the Bank Secrecy Act (BSA) as well as sanctions programs administered by the Treasury Department's Office of Foreign Assets Control (OFAC)."

"US depository institutions that maintain correspondent accounts for foreign financial institutions are required to establish appropriate, specific, and risk-based due diligence policies, procedures, and processes that are reasonably designed to assess and manage the risks inherent with these relationships."

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