On Aug. 30, 2016, the Treasury Department, the Federal Reserve, the FDIC, the National Credit Union Administration and the Office of the Comptroller of the Currency issued guidance to U.S. banks that hold correspondent accounts for foreign financial institutions. The Joint Fact Sheet on Foreign Correspondent Banking seeks to clarify U.S. banks' obligations when hosting these accounts. Among other things, the fact sheet emphasizes that "Under existing U.S. regulations, there is no general requirement for U.S. depository institutions to conduct due diligence on an FFI's [a foreign financial institution's] customers. In determining the appropriate level of due diligence necessary for an FFI relationship, U.S. depository institutions should consider the extent to which information related to the FFI's markets and types of customers is necessary to assess the risks posed by the relationship, satisfy the institution's obligations to detect and report suspicious activity, and comply with U.S. economic sanctions."
As we have noted before in this blog, "Any bank in the world that wishes to allow its customers to hold U.S. dollar-denominated accounts and conduct transactions in U.S. dollars must have access to the U.S. banking system. This requires foreign banks to open accounts at banks in the U.S., known as correspondent banks." Any clarification of U.S. banks' obligations in this area will be welcomed by both U.S. banks and their foreign correspondent banking customers.
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