Guidance on Correspondent Banking

Correspondent Banking relationships are essential in the global payment system and vital to international trade and the global economy as a whole, including for emerging markets and developing economies. Correspondent banking relationships are subject to anti-money laundering / counter-terrorist financing measures: the FATF Recommendations require financial institutions to identify and manage the risks associated with these business relationships and to apply specific due diligence measures when they are conducted on a cross-border basis.

In recent years, financial institutions have increasingly decided to avoid, rather than to manage, possible money laundering or terrorist financing risks, by terminating business relationships with entire regions or classes of customers. This so-called 'de-risking' practice has negatively impacted correspondent banking. De-risking is not in line with the FATF Recommendations, and is a serious concern to the international community, including the FATF and the FATF-Style Regional Bodies. De-risking can result in financial exclusion, less transparency and greater exposure to money laundering and terrorist financing risks.

Since June 2015, the FATF has clarified the application of the risk-based approach to correspondent banking relationships. The financial sector welcomed this, but sought further clarification on regulatory expectations in terms of customer due diligence. Guidance Correspondent Banking Services

The FATF developed this guidance with input from the private sector, and in collaboration with other interested international bodies, including the Financial Stability Board (FSB), which is coordinating a four-point action plan to assess the extent of de-risking problem and identify possible policy responses. This guidance addresses one of the points of this action plan: the clarification of regulatory expectations.