10.2.1. Obligations in respect of correspondent banking relationships

An Authorised Firm proposing to have a correspondent banking relationship with a respondent bank must:

1. (a) conduct appropriate CDD on the respondent bank;
2. (b) as part of (a), gather sufficient information about the respondent bank to understand fully the nature of the business, including making appropriate enquiries on its management, its major business activities and the countries or jurisdictions in which it operates;
3. (c) determine from publicly-available information the reputation of the respondent bank and the quality of supervision, including whether it has been subject to a money laundering investigation or relevant regulatory action;
4. (d) assess the respondent bank's AML controls and ascertain if they are adequate and effective in light of the FATF Recommendations;
5. (e) ensure prior approval of the Authorised Firm’s senior management is obtained before entering into a new correspondent banking relationship;
6. (f) understand the respective responsibilities of the parties to the correspondent banking relationship and properly document those responsibilities;
7. (g) be satisfied that, in respect of any customers of the respondent bank who have direct access to accounts of the Authorised Firm, the respondent bank:
8. (i) has conducted CDD (including on-going CDD) at least equivalent to that in AML 6.3.1 in respect of each customer;
9. (ii) will conduct ongoing CDD at least equivalent to that in AML 6.4.1, in respect of each customer; and
10. (iii) can provide the relevant CDD information in (i) to the Authorised Firm upon request; and
11. (h) document the basis for its satisfaction that the requirements in (a) to (g) are met.

In the process of completing the CDD, prior to establishing a correspondent banking relationship, the Authorised Firm must consider all of the following:

1. (a) whether it is regulated and supervised for AML and CFT purposes by a regulatory or governmental authority, body or agency equivalent to the Regulator in each foreign jurisdiction in which it operates;
2. (b) whether each foreign jurisdiction in which it operates has an effective AML and CFT regime;
3. (c) if the respondent is a subsidiary of another legal person—the following additional matters:
4. (i) the other person’s domicile and location (if different);
5. (ii) its reputation;
6. (iii) whether the other person is regulated and supervised (at least for AML and CFT purposes) by a regulatory or governmental authority, body or agency equivalent to the Regulator in each jurisdiction in which it operates;
7. (iv) whether each foreign jurisdiction in which it operates has an effective AML and CFT regime;
8. (v) its ownership, control and management structure (including whether it is owned, controlled or managed by a politically exposed person).

If the Authorised Firm establishes a correspondent banking relationship with the respondent, the Authorised Firm must:

1. (a) conduct enhanced ongoing monitoring of the volume and nature of the transactions conducted under the relationship, and if necessary, obtain and record the information on the source of monies for conducted transactions; and
2. (b) conduct ongoing review of the relationship at least on an annual basis.

An Authorised Firm must:

1. (i) not enter into a correspondent banking relationship with a Shell Bank; and
2. (ii) take appropriate measures to ensure that it does not enter into, or continue a correspondent banking relationship with, a bank which is known to permit its accounts to be used by Shell Banks. Guidance on correspondent banking AML 10.2.1 prohibits an Authorised Firm from entering into a correspondent banking relationship with a Shell Bank or a bank which is known to permit its accounts to be used by Shell Banks.