The 40 FATF Recommendations stand as the international standards that underpin countries’ legal systems for combating money laundering and terrorist financing. As an intergovernmental organization, one of the FATF’s core objectives and competencies is the creation and development of these standards.
FATF Recommendation 13 establishes specific considerations that financial institutions must apply when a business relationship involves cross-border correspondent banking and similar arrangements.
Correspondent banking refers to the provision of banking services by one bank, acting as a correspondent, to another financial institution. The correspondent bank offers its services in its own jurisdiction to other banks that lack a branch or presence in the region.
FATF outlines a set of essential requirements for cross-border correspondent banking relationships that must be implemented alongside standard customer due diligence measures.
Institutions must collect sufficient information about the respondent institution, enabling a clear understanding of the nature of the business relationship, the entity’s reputation, and the quality of its supervision. Additionally, it is necessary to determine whether the institution has been subject to any investigations related to money laundering or terrorist financing, or any other regulatory actions.
Furthermore, it is also essential to assess the internal controls of the respondent institution, ensuring that they are adequate to prevent money laundering and terrorist financing. To establish this business relationship, senior management approval must be obtained, and a clear allocation of responsibilities between both institutions must be defined.
Finally, with respect to payable-through accounts, the respondent institution must ensure that proper due diligence has been performed on the customers who have direct access to the account. It must also be able to provide the correspondent bank with information on the identity of those customers.
Are you interested in learning more about the 40 FATF Recommendations? Discover our series of articles where we explain each of them and their significance.
- Recommendation 1: Risk assessment and application of a risk-based approach.
- Recommendation 2: National cooperation and coordination.
- Recommendation 3: Money laundering offense.
- Recommendation 4: Confiscation and provisional measures.
- Recommendation 5: Terrorist financing offense.
- Recommendation 6: Targeted financial sanctions related to terrorism and terrorist financing.
- Recommendation 7: Targeted financial sanctions related to the proliferation of weapons of mass destruction.
- Recommendation 8: Non-profit organizations.
- Recommendation 9: Banking secrecy.
- Recommendation 10: Customer due diligence.
- Recommendation 11: Record-keeping.
- Recommendation 12: Politically Exposed Persons.
- Recommendation 13: Correspondent banking.
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