An Update on Foreign Correspondent Banking
Foreign correspondent banking relationships have come under significant strain over the past decade, but particularly in recent years, as U.S. financial regulators and law enforcement agencies have more closely scrutinized these relationships and pursued enforcement actions with respect to anti-money laundering compliance. Increased enforcement risk and regulatory compliance burdens have led many banks to “de-risk” their foreign correspondent banking activities, sometimes terminating foreign correspondent accounts entirely from certain countries with unsatisfactory AML standards.
On October 5, 2016, the Office of the Comptroller of the Currency released guidance setting forth supervisory expectations for banks’ periodic risk reevaluations of their foreign correspondent account customer relationships.
This memorandum reviews the OCC’s guidance, as well as other recent regulatory developments in this area.