New guidance for US banks on correspondent banking relationships

The Office of the Comptroller of the Currency (OCC) has provided guidance to US banks advising them to periodically review risks in their correspondent banking portfolio and take other measures to prevent anti-money laundering (AML) violations.

The advice aims to provide more guidance to banks afraid of maintaining relationships with foreign counterparts.

Manage the risks

The OCC provides banks with instructions on how to measure and guard against risks in correspondent banking portfolios amid concerns that a global crackdown on terror financing and AML violations has led financial institutions to cut off vital business links with banks in developing countries.

“Banks should ensure that decisions to terminate foreign correspondent account relationships resulting from risk re-evaluation are based on analysis of the risks presented by individual foreign correspondent account relationships and the banks’ ability to manage those risks,” the federal regulator said in a statement.

The OCC says in its guidance that it “does not direct banks to open, close, or maintain individual accounts,” and does not order the institutions it oversees to close individual accounts or to “engage in the termination of entire categories of customer accounts.”

Correspondent concerns

But the continued crackdown by regulators on illicit funds flows has led to US banks cutting off many correspondent banking relationships.

Without those relationships, many foreign banks, particularly those in the developing world, would be cut off from the global financial system.


The IMF and multilateral development banks as well as non-governmental organisations have criticised US enforcement of AML regimes and the Bank Secrecy Act, and the effect it has had on correspondent banking.

The OCC appears aware of such criticism but nevertheless puts the onus on banks.

“Decisions to retain or terminate banking relationships reside with the bank,” the guidance says.

More details of the OCC’s risk management guidance can be found here.

Categories: Trade Based Financial crimes News

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