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Financial Institutions Adjusted Quickly to Correspondent Rules: FinCEN
By Matt Squire
printFinancial institutions adjusted well to August 2007 requirements that they scrutinize some correspondent relationships, according to a study by the U.S. Treasury Department. The survey, by the department's Financial Crimes Enforcement Network (FinCEN), said that the financial institutions queried had little trouble with the rules, first proposed in January 2006. The regulations were the final stage in the implementation of Section 312 of the Patriot Act. The regulations required banks to more closely scrutinize correspondent relationships with foreign banks that have an offshore license or a banking license from some countries deemed to be at high risk of money laundering....
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The processing of checks and drafts from foreign institutions does not by itself constitute a correspondent relationship, FinCEN said in the guidance.
As any compliance officer knows, vetting a banking correspondent relationship is no simple matter. Initial evaluations of another institution's anti-money laundering program can be long, the cost high and reviews perpetual. Three consultants talk about best practices in correspondent banking.
Banking compliance officers don't have clear guidelines for defining correspondent relationships, and consequently meet their AML due diligence duties. Some institutions set narrow limits while others cast their net wide.
The fallout from the securities fraud and anti-money laundering case involving the two institutions may continue, suggest compliance consultants, who say financial institutions involved in correspondent transactions with the defendants may face pressure from regulators and law enforcement.