FSA: Banks’ management of high money-laundering risk situations


Correspondent banking

16. Some banks conducted good quality AML due diligence and monitoring of relationships, while others, particularly some smaller banks, conducted little and, in some cases, none. In several smaller banks, a tick-box approach to AML due diligence was noted. Many (especially smaller) banks’ due diligence procedures resembled a ‘paper gathering’ exercise with no obvious assessment of the information collected; there was also over-reliance on the


Wolfsberg Group AML Questionnaire


which gives only simple yes or no answers to basic AML questions without making use of the Wolfsberg Principles on correspondent banking. And when reviews of correspondent relationships were conducted, they were often clearly copied and pasted year after year with no apparent challenge.

17. Some banks did not carry out due diligence on their parent banks or banks in the same group, even when they were located in a higher risk jurisdiction or there were other factors which increased the risk of money laundering.


18. A more risk-based approach is required where PEPs own, direct or control respondent banks. We found there was a risk that some banks’ respondents could be influenced by allegedly corrupt PEPs, increasing the risk of these banks being used as vehicles for corruption and/or money laundering.


19. Transaction monitoring of correspondent relationships is a challenge for banks due to often erratic, yet legitimate, flows of funds. Banks ultimately need to rely on the explanations of unusual transactions given by respondents and this can be difficult to corroborate. However, there were some occasions where we felt banks did not take adequate steps to verify such explanations.

Detailed report link:  here