Sunday, March 16, 2014


Finally, an anti-money laundering measure that makes sense. JP Morgan Chase has reportedly announced that it will no longer open any new correspondent accounts for foreign banks. Though a purely defensive measure, to respond to existing AML/CFT deficiencies, it deserves serious attention.

Here's why:

(1) There is no shortage of correspondent accounts in the United States; every nation, no matter how small or remote, already has a number of financial institutions with correspondent relationships with American banks. Unless you are a tiny, out of the way, micro-bank somewhere off the beaten path, you already have a conduit into the American financial structure.

(2) Any newly-formed foreign bank can easily piggy-back into the New York banking center through an existing relationship. If this new bank becomes moderately successful, and later needs a direct connection with the US, they can purchase a bank that has one already.

(3) Obviously, we do NOT need any new banks from countries that have no effective AML and CFT, are obscure banks controlled by organized crime, or are located in countries where corrupt PEPs, drug kingpins, or terrorist financiers, abide. If no new correspondents were allowed, greedy relationship officers would no longer be besieging their superiors to open those dodgy relationships.

(4) If big US banks are to effectively curtail money laundering, terrorist financing, and organized crime, they need time to re-qualify those correspondents that they already maintain, to weed out those that have proven themselves to be problematic. Once a correspondent account is closed, it will be be eligible to be reopened anywhere. How's that for a negotiating point, to bring your correspondents into line ?

I commend JP Morgan Chase for taking this extraordinary step; may others emulate them.


  1. "I commend JP Morgan Chase for taking this extraordinary step; may others emulate them."

    I guess I would have more sympathy for your view if the US banks weren't themselves above the law.

    From a policy standpoint: What percentage of money laundering ultimately has to do with the drug war? I am guessing 90%. Just legalize drugs and most of this problem goes away.

  2. thank you for the information that is helpful


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