BSA/AML Examiner School Case Study

Internal Use Only

Note: The account officer in conjunction with the BSA Officer should conduct adequate and ongoing due diligence on the foreign correspondent banks relationships, which may include periodic visits. Monitor transactions related to these accounts to detect and report suspicious activities. Enhanced Due Diligence for High-Risk Correspondent Banks Besides obtaining all the general CDD requirements, the Bank must also implement the following enhanced due diligence procedures for these types of accounts: • An offshore bank • A foreign bank organized or chartered under the laws of a non-cooperative jurisdiction • A foreign bank organized or chartered under the laws of a foreign country that has been designated by the secretary of the treasury as warranting special measures due to money laundering concerns Example enhanced due diligence information the Bank may require for high-risk foreign correspondent accounts: • For banks that are not publicly traded, ensure the Bank has identified each of the owners of the bank and the nature and extent of the ownership interest of each person/entity. • If the bank is not publicly held, conduct independent due diligence of owners. • If the bank provides correspondent accounts to other foreign banks, determine the identity of the banks and your correspondent's due diligence regarding their business. • Determine if the bank has reasonably designed due diligence policies, procedures and controls for correspondent banking through discussions with key senior management of the bank and by reviewing written material, if appropriate. • Request the names and addresses of the foreign banks for which the bank maintains correspondent accounts, and if such information is not obtained, consider not opening the account. • Determine changes in the ownership or key senior management of the bank during the past five years. • Determine the relationship between the bank and the government of its home country jurisdiction, including whether the bank is a government-owned entity. • Review publicly available information to determine whether the bank has been the subject of a money laundering or other criminal investigation, criminal indictment or conviction, any civil enforcement action based on violations of counter money laundering laws or regulations. or any investigation, indictment, conviction or civil enforcement action relating to financing of terrorists. • The account officer must understand the intended use of the accounts and expected account activity (i.e., determine whether the relationship will serve as a payable through account); understands the foreign correspondent bank's other correspondent relationships (i.e., determine whether nested accounts will be utilized); assess the risks posed by the foreign correspondent financial institution relationships. Ensure foreign correspondent financial institution relationships are appropriately included within the Bank's suspicious activity monitoring and reporting systems and establish criteria for closing the foreign correspondent financial institution account. Special Procedures When Due Diligence Cannot Be Performed In the event that appropriate due diligence procedures cannot be performed, it is the policy of the Bank: • To refuse to open a correspondent or high risk account; • Suspend transaction activity of the account; • File a suspicious activity report; or • Close the account.

For Training Purposes Only

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