 |
 |
 |
 |
 |
 |
|
 |
||||||
 |
|
|
|
|
|
|
| Wolfsberg AML Principles for Correspondent Banking | ||
1 |
Preamble |
|
1 |
Preamble |
|
| The Wolfsberg Group of International Financial
Institutions(1) has agreed that these Principles constitute global
guidance on the establishment and maintenance of Correspondent Banking
relationships. The Wolfsberg Group believes that adherence to these
Principles will further effective risk management and enable institutions
to exercise sound business judgement with respect to their clients.
Furthermore, adherence to these Principles will support the aim of
Wolfsberg Group members to prevent the use of their worldwide operations
for criminal purposes. |
||
2 |
Correspondent Banking |
|
| These Principles extend to all Correspondent
Banking relationships an institution establishes or maintains for
another Correspondent Banking Client(2). Correspondent Banking is
the provision of a current or other liability account and related
services to another institution used to meet its cash clearing, liquidity
management and short-term borrowing or investment needs. Institutions
may decide to extend these Principles to all relationships that they
maintain with financial institutions. |
||
3 |
Responsibility and Oversight |
|
| The institution shall define policies and
procedures that require specified personnel to be responsible for
ensuring compliance with these Principles. The policies and procedures
shall require that at least one person senior to or independent from
the officer sponsoring the relationship approve the Correspondent
Banking relationship. The policies and procedures also shall provide
for independent review by appropriate personnel to ensure continued
compliance with the institution's policies and procedures and these
Principles. |
||
 |
||
4 |
Risk-Based Due Diligence |
|
| These Principles advocate a risk-based
approach. Correspondent Banking Clients presenting greater risk should
be subjected to a higher level of due diligence. These Principles
outline the type of risk indicators that an institution shall consider
in initiating the relationship, and on a continuing basis, to ascertain
what reasonable due diligence or enhanced due diligence it will undertake.
In particular, the institution will consider these risk indicators:
|
||
| • | The Correspondent Banking Client's Domicile
- The jurisdiction where the Correspondent Banking Client is based and/or where its ultimate parent is headquartered may present greater risk. Certain jurisdictions are internationally recognised as having inadequate anti-money laundering standards, insufficient regulatory supervision, or presenting greater risk for crime, corruption or terrorist financing. On the other hand, other jurisdictions such as members of the Financial Action Task Force (FATF) have more robust regulatory environments representing lower risks. Institutions will review pronouncements from regulatory agencies and international bodies, such as the FATF, to evaluate the degree of risk presented by the jurisdiction in which the Correspondent Banking Client is based and/or in which its ultimate parent is headquartered. |
|
| • | The Correspondent Banking Client's Ownership and Management
Structures- The location of owners, their corporate legal form and the transparency of ownership structure may present greater risks. Similarly, the location and experience of management may raise additional concerns. The involvement of Politically Exposed Persons (PEP) in the management or ownership of certain Correspondent Banking Clients may also increase the risk. PEPs are individuals who have or have had positions of public trust such as government officials, senior executives of government corporations, politicians, important political party officials etc. and their families and close associates. |
|
| • | The Correspondent Banking Client's Business and Customer
Base- The type of businesses the Correspondent Banking Client engages in, as well as the type of the markets the Correspondent Banking Client serves, may present greater risks. Involvement in certain business segments internationally recognised as creating particular vulnerability to money laundering, corruption or terrorist financing presents additional concern. Consequently, a Correspondent Banking Client that derives a substantial part of its business income from Higher Risk Clients may present greater risk. Higher Risk Clients are those clients of a Correspondent Banking Client that may be involved in activities or are connected to jurisdictions that are identified by credible sources as activities or countries being especially susceptible to money laundering. |
|
| Each institution may give the appropriate
weight to each risk factor as it deems necessary. |
||
5 |
Due Diligence Standards |
|
| All Correspondent Banking Clients shall
be subjected to appropriate due diligence that will seek to assure
that an institution is comfortable conducting business with a particular
client given the client's risk profile. It may be appropriate for
an institution to consider the fact that a Correspondent Banking Client
operates in or is subjected to a regulatory environment that is internationally
recognised as adequate in the fight against money laundering. In these
instances, an institution may also rely on publicly available information
obtained either from the Correspondent Banking Client or reliable
third parties (regulators, exchanges, etc.) to satisfy its due diligence
requirements. In conducting due diligence on any Correspondent Banking
Client, the elements set out below shall be considered, as appropriate.
|
||
• |
Client Domicile and Organisation The jurisdiction where the Correspondent Banking Client's ultimate parent is incorporated and/or headquartered and where the particular operating unit wishing to maintain the relationship conducts its business, as well as the corporate legal form of the Correspondent Banking Client. Client Ownership and Executive Management Whether the Correspondent Banking Client is publicly held or privately owned; whether if publicly held, its shares are traded on an exchange in a jurisdiction with an adequately recognised regulatory scheme; and the identity of any significant controlling interests. The structure and experience of Executive Management. These are the most senior executives in charge of its day-to-day business. Depending on the circumstances of the Correspondent Banking Client this may include the Members of the Correspondent Banking Client's Board of Directors or Supervisory Board or Executive Committee or its Executive Committee or its equivalent. The existence of any PEP in the Executive Management or ownership structure. Correspondent Banking Client's Business The types of financial products and services the Correspondent Banking Client offers to its own clients, and depending upon the risk associated with the Correspondent Banking Client, the geographic markets reached. Products or Services Offered The business purpose(s) for the relationship with the Correspondent Banking Client, including the products and services offered to the Correspondent Banking Client. Regulatory Status and History The primary regulatory body responsible for overseeing or supervising the Correspondent Banking Client. If circumstances warrant, an institution will also consider publicly available materials to ascertain whether the Correspondent Banking Client has been the subject of any criminal or adverse regulatory action in the recent past. Anti-Money Laundering Controls The nature of the Correspondent Banking Client's anti-money laundering controls and the extent to which they are globally applied. No Business Arrangements With Shell Banks Confirm that the Correspondent Banking Clients will not use the institution's products and services to engage in business with Shell Banks. A Shell Bank is a bank that: (i) does not conduct business at a fixed address in a jurisdiction in which the Shell Bank is authorised to engage in banking activities; (ii) does not employ one or more individuals on a full time business at this fixed address; (iii) does not maintain operating records at this address; and (iv) is not subject to inspection by the banking authority that licensed it to conduct banking activities. A bank which meets these requirements but which is also a Regulated Affiliate is not a Shell Bank for the purposes of these Principles. A Regulated Affiliate is a bank which would otherwise be a Shell Bank or an Offshore Bank (as the case may be) but which is owned, directly or indirectly by a financial institution that is licensed in a jurisdiction that is not a FATF Non-cooperative Jurisdiction and which is subject to supervision by the banking authority of that jurisdiction. Client Visit Unless other measures suffice, a representative of the Institution should visit the Correspondent Banking Client at their premises prior to or within a reasonable period of time after establishing a relationship with an Correspondent Banking Client, amongst other things to confirm that the Correspondent Banking Client is not a Shell Bank. |
|
|
||
6 |
Enhanced Due Diligence |
|
| In addition to due diligence, each institution
will also subject those Correspondent Banking Clients that present
greater risks to enhanced due diligence. The enhanced due diligence process will involve further consideration of the following elements designed to assure the institution has secured a greater level of understanding: |
||
| • | Ownership and Management For all significant controlling interests, the owners' sources of wealth and background, including their reputation in the market place, as well as recent material ownership changes (e.g. in the last five years). Similarly, a more detailed understanding of the experience of each member of the Executive Management as well as recent material changes in the Executive Management structure (e.g. within the last two years). |
|
| • | PEP Involvement If a PEP appears to have an interest or management role in a Correspondent Banking Client, then the institution shall ensure it has an understanding of that person's role in the Correspondent Banking Client. |
|
| • | Correspondent Banking Client's Anti-Money Laundering
Controls The quality of the Correspondent Banking Client's anti-money laundering and client identification controls including whether these controls meet internationally recognised standards. The extent to which an institution will enquire will depend upon the risks presented. Additionally, the institution may speak with representatives of the Correspondent Banking Client to obtain comfort that the Correspondent Banking Client's senior management recognise the importance of anti-money laundering controls. |
|
| • | Downstream Correspondent Clearing A Downstream Correspondent Clearer is a Correspondent Banking Client who receives Correspondent Banking services from an institution and itself provides Correspondent Banking services to other financial institutions in the same currency as the account it maintains with the institution. When these services are offered to an Correspondent Banking Client that is itself a Downstream Correspondent Clearer, the institution will take reasonable steps to understand the types of financial institutions to whom the Correspondent Banking Client offers the Downstream Correspondent services and consider the degree to which the Correspondent Banking Client examines the anti-money laundering controls of the financial institutions to whom it offers those services. |
|
7 |
Shell Banks |
|
An institution will not offer its products
or services to a Shell Bank. |
||
8 |
Central Banks and Supra-National Organisations |
|
| These Principles shall generally not apply
to relationships with central banks and monetary authorities of FATF-Member
Countries or Supra-national, Regional Development or Trade Banks (e.g.
European Bank for Reconstruction and Development, International Monetary
Fund, the World Bank), at least insofar as the relationship with that
entity involves the provision of products and services that are in
keeping with that entity's primary activities. |
||
9 |
Branches, Subsidiaries and Affiliates |
|
| The determination of the level and scope
of due diligence that is required on a Correspondent Banking Client
shall be made after considering the relationship between the Correspondent
Banking Client and its ultimate parent (if any). In general, in situations
involving branches, subsidiaries or affiliates, the parent of the
Correspondent Banking Client shall be considered in determining the
extent of required due diligence. In instances when the Correspondent
Banking Client is an affiliate that is not substantively and effectively
controlled by the parent, then both the parent and Correspondent Banking
Client shall be reviewed. However, certain facts unique to the branch,
subsidiary or affiliate may dictate that enhanced due diligence be
performed. |
||
10 |
Application to Client Base |
|
| nstitutions will apply these Principles
to new Correspondent Banking Clients. Additionally, as these Principles
unify concepts that may not have previously been applied globally,
each institution will undertake a risk-based review of their existing
base of Correspondent Banking Clients to determine whether additional
due diligence is necessary to achieve the level of understanding espoused
by these Principles. |
||
11 |
Updating Client Files |
|
| The institution's policies and procedures
shall require that the Correspondent Banking Client information is
reviewed and updated on a periodic basis or when a material change
in the risk profile of the Correspondent Banking Client occurs. Periodic
review of the Correspondent Banking Clients will occur on a risk-assessed
basis. |
||
|
||
12 |
Monitoring and Reporting of Suspicious Activities |
|
| The institution shall implement bank-wide
policies and procedures to detect and investigate unusual or suspicious
activity and report as required by applicable law. These will include
guidance on what is considered to be unusual or suspicious and give
examples thereof. The policies and procedures shall include appropriate
monitoring of the Correspondent Banking activity. |
||
13 |
Integration with Anti-Money Laundering Programme |
|
| These Principles shall form an integral
component of the institution's wider anti-money laundering programme. |
||
14 |
Recommendation for an International Registry |
|
| The Wolfsberg Group encourages the development
and regulatory endorsement of an international registry for financial
institutions. Upon registering financial institutions would submit
information useful for conducting due diligence as outlined in these
Principles. Financial institutions would rely on this information
in adhering to these Principles. |
||
| (1) | The Wolfsberg Group consists
of the following leading international financial institutions: ABN
AMRO Bank N.V., Banco Santander Central Hispano S.A., Bank of Tokyo-Mitsubishi
Ltd., Barclays Bank, Citigroup, Credit Suisse Group, Deutsche Bank
AG, Goldman Sachs, HSBC, J. P. Morgan Chase, Société
Générale, UBS AG. |
|
| (2) | Correspondent Banking Client
is a client of an institution that is a financial services firm that
uses the institution's Correspondent Banking services accounts to
clear transactions for its own client base. The term includes (but
is not limited to) Banks, Broker-Dealers, Mutual Funds, Unit Trusts,
Investment Services Firms, Hedge Funds, Introducing Brokers, Money
Service Businesses, Pension Funds, Credit Card Providers, Commercial
Credit Companies, Household Finance Companies, Mortgage Banks, Building
Societies, and Leasing Companies. |
|
© 2008 by The Wolfsberg Group