Financial Action Task Force Publishes Guidance On Correspondent Banking Services

On October 21, 2016, the FATF published Guidance on correspondent banking services, which it has developed in collaboration with the FSB. The Guidance is in response to increased concerns about so-called "de-risking," whereby financial institutions avoid, rather than manage, the risks associated with money laundering or terrorist financing by terminating business relations with entire regions or classes of customers. The FATF considers that de-risking is inconsistent with FATF Recommendations, that it has negatively impacted correspondent banking and that it may result in financial transactions being directed into less regulated areas which would reduce transparency and increase exposure to money laundering and terrorist financing risks. The Guidance follows a statement issued by FATF in June 2015 which clarified that when correspondent banking relationships are established, correspondent banks are required to perform customer due diligence on the respondent institution