An arrangement in which one financial institution provides services on behalf of another institution, typically in a different jurisdiction, enabling banks to extend global reach without establishing a local presence. This facilitates cross-border payments, funds transfers, deposit acceptance, and the clearing of checks and other financial transactions.
Main/
Correspondent Banking Services
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Code
PS0119
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Name
Correspondent Banking Services
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Version
1.0
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Category
Payment, Transfer & Remittance Services
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Created
2025-03-12
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Modified
2025-04-02
Related Techniques
- Allows criminals to move funds internationally through intermediary banks, reducing transparency regarding the ultimate beneficial owners.
- Varying AML standards between correspondent banks can shield the multi-layered corporate structure from thorough due diligence and detection.
- Use of nested and multiple correspondent accounts allows rapid cross-border fund transfers, complicating AML controls.
- Transfers via different intermediaries help form circular transaction chains, obscuring ultimate beneficiaries and the real source of funds.
- Provide indirect cross-border pathways through multiple intermediary banks, complicating AML oversight.
- Enable repeated offshore transactions, leveraging banks in secrecy havens as part of a layered network that masks the original illicit source of funds.
- Facilitates cross-border fund movements through networks of foreign and local banks, enabling criminals to route illicit funds through multiple correspondent accounts.
- The indirect relationship between the originating and beneficiary institutions obscures transactional details, complicating AML investigations seeking to link endpoints and trace beneficiaries.
- State-owned entities with correspondent relationships can shift large sums internationally, relying on foreign banks’ limited scrutiny of politically connected customers.
- Diplomatic privileges and requests for special treatment can deter thorough due diligence, hindering host-state AML oversight.
- Infiltration at leadership or compliance levels allows criminals to bypass monitoring for cross-border transactions, enabling large-scale layering through correspondent channels.
- Subverted or complicit managers can manipulate or disable AML checks, concealing suspicious activity from partner institutions and regulators.
- Criminals exploit the respondent bank’s lax or unverified AML controls to funnel illicit proceeds through cross-border payments.
- This arm’s-length relationship often means the correspondent bank relies too heavily on the respondent’s oversight, allowing illicit funds to enter the system undetected without independent checks.
- Criminals use layered correspondent and respondent banking relationships to obscure beneficial ownership and transaction trails across different jurisdictions.
- They exploit uneven AML standards, routing funds through multiple bank networks, creating blind spots that make tracing the source and destination more difficult.
- Insiders or colluding staff can manipulate the cross-border transaction chain, preventing automated screening or flagging of illicit transfers.
- This misuse conceals true beneficial owners or sanctioned parties, leveraging weaknesses in intermediary clearing points to evade detection.
- Provide foreign banks with access to the domestic banking system, facilitating cross-border transactions that may obscure sanctioned parties.
- Nested accounts and insufficient oversight in respondent institutions can enable covert movement of restricted funds.
- Illicit proceeds from environmental crimes are routed through networks of respondent banks in multiple jurisdictions.
- Limited visibility into ultimate beneficiary details facilitates layering and the concealment of funds’ illegal origins.
- Intermediary banks in cross-border transactions may fail to detect inflated invoice values, enabling seamless movement of overvalued export proceeds.
- Layers of correspondent relationships reduce transparency, hindering the identification of suspicious pricing or ultimate beneficiaries.
- In cross-border scenarios, multiple respondent banks process fragments of transactions, with each seeing only localized account and transfer information.
- Distributing funds through different correspondent relationships exploits data silos between jurisdictions, preventing a unified view of suspicious patterns.