Wednesday, February 22, 2017


It is always good to get alternative, or even opposing, views, on any major compliance issue, and the World Bank's White Paper Stakeholder Dialogue on De-Risking offers a somewhat divergent opinion on the problem correspondent banks are experiencing, when their relationships with onshore mainstream correspondents are terminated, for what are described as risk-based reasons.

The White Paper, which adopts the FATF position, that what is referred to as 'de-risking" is really an avoidance of the issue, by the big banks, rather than seeking a valid solution, recommends that foreign correspondent banks share customer information, to reduce risk, and minimize onshore bank insecurity over lack of knowledge about the correspondent's customers. it takes the position that de-risking is an excuse, and objects to the use of the term on principle, and states that solutions are available.

The troublesome issue of "nesting," where a bank which has had its correspondent accounts closed, uses the facilities of one who still has theirs, is recognized, which does demonstrate that the World Bank, while acting as an advocate for the needs of the foreign correspondent, recognizes that clear and present dangers do exist.

I am attaching a link to the Findings and Recommendations, which are instructive, but many of the recommendations are admittedly difficult or expensive to implement, or would require cooperation, on either a private, or governmental, level, to the extent that is not feasible, on a timely basis. The White Paper's recommendation, regarding the sharing of client information, meaning t he implementation of Know your Customer's Customers, or KYCC, is in line with the conclusions I have previously advanced on this blog. KYCC may be the only effective, and possible, solution, and though its has been recognized for several years by the compliance industry, there has been a lot of foot dragging. with the widespread global closure of correspondent accounts, it is time for KYCC to become banking best practices.

Readers wishing to access the White Paper, may access the complete text here.

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