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

Correspondent Bank Monitoring
If you have been in the AML industry for any amount of time you are aware that correspondent banking clients pose an increased risk of money laundering to a financial institution.

Based on existing regulations, guidance from the Office of the Comptroller of the Currency, and industry “best” practices, financial institutions conduct enhanced due diligence on correspondent banking clients at the time of onboarding and on a predetermined periodic basis, generally every year.

The disconnect is in the fact that Section 312 of the  PATRIOT Act outlines the following due diligence requirements.

U.S. financial institutions covered by the final rule must establish a due diligence program that includes appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States.

In today’s regulatory environment, is it reasonable for financial institutions to ignore all of the public risk information made available everyday, and only look at the new information once a year, or rely only on transaction monitoring systems to identify every case on suspicious activity?

What’s the risk?

The most obvious issue is that if a corresponding banking client has negative news published on them between periodic renewal periods, a financial institution will generally not be alerted to it until the time it comes up for renewal again.


Only last week, FinCEN announced the assessment of a $2 million civil money penalty against a small Texas bank for willfully violating the BSA by taking on international correspondence activities without properly equipping themselves to manage such business.   Specifically the bank failed to identify and consider public information about a foreign correspondent bank owner’s alleged involvement in securities fraud among other things.

My bank’s covered, we screen against {insert database’s name} for negative news

Sorry, while screening a static vendor database for negative news is better than nothing, those databases are extremely limited in the amount of information available in them, and how often they are updated.  The volume of information publicly available is growing at an exponential rate and the database vendors who curate those lists are simply not able to keep pace with the volume of relevant risk information published every day.  If you aren’t actively monitoring media directly and only relying on a vendor’s list, you are missing relevant information.

If you are interested in learning more about how those databases work, check out David Caruso’s article outlining their strengths and weaknesses.

But I don’t want to do any more work!

Now even if you acknowledge that the vendor lists you are screening against don’t nearly identify all of the risk information and negative news relevant to your high risk clients, it is a valid concern that implementing a system that actually finds this information will cause significantly more work for your overworked analysts and investigators.

While it is true that this could create some more work dispositioning important things that previously went unidentified, the potential work load is offset by two important factors.

With today’s existing technology the media monitoring system should utilize natural language processing and machine learning to identify relevant results and provide in-depth controls to identity only the information that is important to your financial institution.  This will cut down on the noise and false positives.

Also, if you are actively monitoring a client throughout the periodic review timeframe the update should go much faster because you will not need to conduct due diligence on the whole last year of information since the client has been continually monitored.   At this point regulators will most likely not be on-board with completely foregoing the periodic review, but automating this research throughout the year should save substantial analyst time across the entire client base.

TransparINT Monitor

So how can I do this!?

(Spoiler) Well you are on the TransparINT blog, and we do provide negative news and risk data search and monitoring solutions to some of the largest banks in the world.   Our TransparINT Monitor tool is a completely self-contained web based solution that can be implemented and accomplish all of the above goals within days.  No need for custom development or involving IT for integration.

If you are interested in learning more, just complete this form and I will have our Chief Client Officer David Caruso reach out to answer any TransparINT questions or regale you with tales of money laundering investigations involving South American dictators at Riggs Bank.

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