30 May 2018
On 19 April 2018, the Monetary Authority of Singapore (“MAS”) announced its support for an initiative by the Wolfsberg Group to help arrest the decline in correspondent banking relationships and enhance banks’ ability to provide cross-border financial transactions.
The Wolfsberg Group is an industry association comprising 13 global banks. It aims to develop frameworks and guidance for the management of financial crime risks, and know your customer (KYC) and anti-money laundering and countering the financing of terrorism (AML/CFT) policies.
In its media release, MAS noted that correspondent banking relationships, which allow banks to access financial services in jurisdictions outside their own and to provide cross-border payment services to their customers, have been declining in recent years. This is partly due to banks’ tightening of anti-money laundering controls. This has resulted in adverse effects for trade and financial inclusion as firms in affected countries have been unable to send and receive international payments.
The Wolfsberg Group’s Correspondent Banking Due Diligence Questionnaire (“CBDDQ”), which was published in February 2018, will enable banks to enter cross-border correspondent banking relationships more efficiently. The Financial Action Task Force (“FATF”) had previously clarified that while correspondent banks are required to assess respondent banks’ risks and control practices, correspondent banks do not have to conduct customer due diligence on the customers of their respondent banks. The CBDDQ supports the FATF guidance by standardising the information that correspondent banks should ask of respondent banks, to assess the latter’s risks and controls, when opening a correspondent relationship.