Correspondent Banking 1 Mr X Citizen of Country
Correspondent Banking (1) Mr X Citizen of Country A Country B Country C Country D Country E Registers Acme Bank Opens account for Acme Bank Deposits illegal funds USD $25 M Tx from Country B Copyright Lessons Learned Ltd 2016 Tx from Country B 1
Correspondent Banking (2) Key facts § Purpose: banks can undertake international financial transactions in jurisdictions where they have no presence § Relationship between two banks: ‘correspondent’ bank (service provider) and ‘respondent’ bank (customer) § Types of service: transactions for both the bank and its customers; wide range of potential services § Inherent risks: reliance on AML and due diligence procedures in respondent banks Money launderers’ perspective § ‘Indirect’ relationship between originator of the transaction and the correspondent bank performing it § Increased potential for concealment § Use of ‘shell banks’ as vehicles for money laundering Copyright Lessons Learned Ltd 2016 2
Correspondent Banking (3) Possible ‘red flags’ § Respondent bank’s ownership structure cannot be verified § Respondent bank has no real physical presence § Respondent bank unable to provide background detail regarding entities for whom they have requested services § Respondent bank unable to provide originator details for transfers for which they are an intermediate bank § Respondent bank provides correspondent banking services for shell banks § Respondent bank permits third parties access direct to its accounts for ‘payable through’ transactions § Numerous requests for large volume wire transfers § Unusually frequent and repetitive transactions § Direction of transfer does not appear to fit with normal or expected business activity Copyright Lessons Learned Ltd 2016 3
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