To become a correspondent bank, you have to pass a tough due diligence process. Below are five critical compliance questions we ask every applicant—and how you can prepare to answer them.
The Role of Compliance in Correspondent Banking
Correspondent banking lets smaller banks access global networks through bigger intermediaries. But these partnerships face strict regulations under FATF and Wolfsberg Principles. Our compliance job: stop AML and CTF risks at the door.
1. What Is Your Institution’s Legal Status?
We verify that you’re a legitimate, licensed bank or financial institution. This means up-to-date trade registration and a valid banking license from a recognised regulator. Fintechs must show proof of regulation too.
Tip: Make sure all documentation meets FATF standards and is current.
2. Who Are Your Beneficial Owners?
We dig deep on anyone owning more than 25% of your institution. Red flags include politically exposed persons (PEPs) and owners in high-risk or sanctioned regions. Lack of clarity or hidden ties are dealbreakers.
Tip: Present a clear, audited ownership structure with third-party verification if possible.
3. What Is the Source of Your Funds?
Every cent must be tracked. We need audited financials, transaction records, or contracts to confirm funds are legitimate. No exceptions for vague or undocumented capital injections.
Tip: Keep a strong paper trail and evidence that lines up with FATF guidelines.
4. Where Are Your Funds Headed?
We check transaction destinations for sanctions risk. Be precise: name the recipients, account numbers, countries. “Various business accounts” isn’t good enough.
Tip: Avoid high-risk or sanctioned jurisdictions and always have the details ready.
5. What Is the Purpose of Your Transactions?
Every transaction must have a legitimate, documented purpose. We look for contracts, invoices, or trade agreements. Vague or unsupported explanations will cause delays or rejections.
Tip: Match every transfer to clear documentation and Wolfsberg Group guidelines.
How to Excel in Correspondent Banking Compliance
Getting these five answers right takes more than paperwork. It requires a proactive, risk-based approach and internal controls that stand up to scrutiny. Review your AML and KYC processes, consult experts, and keep your documents airtight.
Ready for the Next Step?
Audit your compliance against FATF and Wolfsberg standards. Partner with a trusted advisor to strengthen your due diligence. Share this with your team so you’re ready for correspondent banking success.
Stay Ahead of Compliance Risks
Global banking moves fast, but compliance is the foundation. If your institution needs help navigating KYC, AML, or correspondent banking relationships, book a call with our experts today.