correspondent banking investigation

Posted by & filed under AML General, Negative News, Research & Investigation.

It is well known that correspondent banking relationships result in heightened money laundering and terrorist financing risks, and deficiencies in AML programs relating to correspondent banking clients have led to billions of dollars in regulatory fines.

While there is a multitude of literature and commentary on the AML risks and challenges associated with foreign correspondent banking,  there is not much practical guidance for an AML investigator who is tasked with a correspondent bank investigation.

Below are six important tips for AML analysts conducting an investigation into a correspondent banking client.

 

1. Due Diligence

Conduct due diligence searches on the bank, its counterparty, and any additional names included in the payment.

Analysts should ask the following:

  • Does the relationship between the parties make sense?
  • Are any of the parties PEPs, sanctioned, or on any watchlist?
  • Has any negative news been identified on any of the parties?

 

2. Transactional Activity

Conduct searches for additional transactional activity involving the bank, its counterparty, and any additional names included in the payment.  Do not limit the search to the names; include account numbers, addresses, any additional information in the payment details, etc.

Analysts should ask the following:

  • Do the transactions make sense?
  • Do the transactions appear to be structured or conducted in such a way as to avoid a reporting requirement?
  • Do the individuals or entities appear to have a legitimate reason for transacting with each other?

 

3. Typologies

Consider known typologies involving the types of transactions, counterparties, industries, geographies, that are involved in the investigation.

Analysts should ask the following:

  • What geographies are involved, and do they make sense?
  • Does the activity appear consistent with any known typology or red flag?

 

4. Requests for Information

If possible or applicable, utilize your bank’s process to contact the bank’s affiliate branch for KYC, onboarding information, and an anticipated activity profile on the parties to the transactions.

Analysts should ask the following:

  • What information was provided at the time of onboarding?
  • What other activity is occurring within any additional account(s)?
  • Does the affiliate have any concerns with the client?

 

5. 314(b) Requests

Utilize the FinCEN 314(b) process, if your bank and the counter financial institution are participants.

Analysts should ask the following:

  • What information was provided at the time of onboarding?
  • What other activity is occurring within any additional account(s)?

 

6. Next Steps

Consider whether the activity appears to be unusual or suspicious, and what actions should be taken.

Analysts should ask the following:

 

Investigations into correspondent banking clients may initially appear to be a bit daunting, as client and transaction information are not always as easily accessible as with domestic clients.  These types of investigations are more challenging to get the “full picture” as to what is occurring in the account.  The tips above should provide some guidance as to how to approach these investigations.


Interested in seeing a better way to search for negative news on correspondent banking clients and the parties involved in your investigation?  Contact us here to set up a live demo of the TransparINT platform.

Comments are closed.