Financial Action Task Force Publishes Guidance on Correspondent Banking Services

The Financial Action Task Force published Guidance on correspondent banking services, which it has developed in collaboration with the Financial Stability Board. The Guidance is in response to increased concerns about so-called "de-risking", whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The FATF considers that de-risking is inconsistent with FATF Recommendations, that it has negatively impacted correspondent banking and that it may result in financial transactions being directed into less regulated areas which would reduce transparency and increase exposure to money laundering and terrorist financing risks.

The Guidance follows a statement issued by FATF in June 2015 which clarified that when correspondent banking relationships are established, correspondent banks are required to perform customer due diligence on the respondent institution but are not required to conduct due diligence on each individual customer of their respondent institution. The FATF Recommendations require financial institutions to identify and manage the risks that are associated with correspondent banking services by adopting a risk-based approach to implementing anti-money laundering and counter-terrorist financing measures. The Guidance explains the FATF's requirements in the context of correspondent banking services. The Guidance notes that not all correspondent banking relations are subject to the same level of money laundering or terrorist financing risks and specifies that due diligence measures must be commensurate to the nature of the risks that apply to the firm. The FATF are aware that prudential and regulatory requirements as well as differing national sanction regimes also drive de-risking, however, this (and other factors that contribute to re-risking) are beyond the FATF's mandate. Therefore, the Guidance aims to clarify how to implement the FATF risk-based approach should be properly and effectively.

View the Guidance.

View the FATF Recommendations.