Correspondent banking KYC requirements

Correspondent banking KYC requirements are the enhanced due diligence measures that financial institutions must apply to cross border correspondent and similar relationships, in addition to ordinary customer due diligence. FATF Recommendation 13 is the global standard that defines those measures for correspondent banking.

In a correspondent relationship, one bank (the correspondent) provides account and payment services to another bank (the respondent). Trade and export finance payments, reimbursements and settlements often travel across those correspondent rails. The KYC object at this layer is the respondent institution, not each underlying commercial customer of the respondent, except where payable through mechanics require additional assurance.

FATF correspondent banking KYC requirements

Recommendation 13 sets out what institutions must do, beyond ordinary customer due diligence, before and during a cross border correspondent banking relationship. Five duties make up that additive layer:

• build a profile of the respondent institution deep enough to understand what its business actually involves, drawing on publicly available material to judge its standing and the quality of the supervision it operates under, including any record of money laundering or terrorist financing investigations or regulatory action against it
• form a considered view on how robust the respondent's own AML/CFT control framework is
• route any new correspondent relationship through senior management sign-off before it is established
• set out in clear terms which institution is responsible for which control at each stage of the relationship
• for payable through arrangements specifically, confirm the respondent bank has already run due diligence on any customer with direct access to the correspondent's accounts, and can produce that due diligence record on request

Correspondent relationships with shell banks are barred outright under the standard. Institutions also carry an ongoing duty to satisfy themselves that their respondent banks are not letting shell banks operate through their accounts.

The interpretive guidance extends similar relationships beyond deposit correspondent banking to arrangements set up for securities transactions or funds transfers, whether the cross border institution is acting as principal or on behalf of its own customers. A payable through account is a correspondent account that a third party uses directly, in its own name, rather than through the respondent acting on its behalf.

Ordinary CDD and beneficial ownership still apply

Recommendation 13 is additive. Ordinary Recommendation 10 CDD still applies to the respondent as customer, including identification and verification, and identification of the UBO of the respondent where the respondent is a legal person. Recommendation 13 then adds respondent specific information, control assessment, senior management approval, responsibility allocation and payable through conditions.

The standard does not require the correspondent to conduct CDD on every customer of the respondent in a nested ordinary correspondent account. Payable through structures are the explicit exception where the correspondent must be satisfied that the respondent has conducted CDD on customers with direct access and can provide that information on request.

Industry frameworks beside FATF

The Wolfsberg Group maintains industry frameworks and guidance for correspondent banking due diligence and payment transparency. Those materials operationalise official expectations into questionnaires and control statements used among global banks. They are industry guidance. They do not replace FATF Recommendations or national AML law.

Entity identification for respondents increasingly uses the LEI where available. FSB and GLEIF materials locate the LEI as the global standard legal entity identifier for parties to financial transactions. The LEI supports consistent naming of the respondent across onboarding and payment systems. It does not satisfy Recommendation 13's qualitative assessment of business, supervision and AML/CFT controls.

Sanctions screening of the respondent, related parties and payment messages, and adverse media screening as part of reputation assessment, sit alongside the Recommendation 13 information gathering duty. Screening does not replace assessment of the respondent's own AML/CFT control framework or the senior management approval requirement.

Boundary for export finance desks

Correspondent banking KYC requirements govern the bank to bank relationship that clears cross border flows. They do not redefine documentary credit rules, OECD Arrangement terms or ECA cover eligibility. When an export or trade transaction pays through a correspondent chain, two diligence layers remain distinct: CDD and beneficial ownership on the commercial customer under Recommendation 10 and national law, and correspondent due diligence on the respondent under Recommendation 13.

Recommendation 13's shell bank prohibition is a bright line, not a risk factor to be weighed: correspondent relationships with shell banks are excluded entirely, and respondents must be confirmed as denying their own accounts to shell banks. That exclusion is a structural eligibility rule for the relationship, separate from risk rated EDD calibrations applied to licensed respondent banks.

Information elements in the respondent file

A Recommendation 13 compliant respondent file is definitionally organised around the five additive duties. Business and supervision information covers the respondent's licence, markets, products, ownership at legal entity level, and publicly available evidence of supervisory quality or enforcement history. AML/CFT control assessment covers the respondent's policies, governance and control framework as understood by the correspondent, not a re performance of CDD on the respondent's entire customer book. Senior management approval is a governance gate before the relationship is established. Responsibility allocation records which institution performs which controls for the services offered. Payable through assurance applies only where third parties have direct access to the correspondent account.

Wolfsberg materials on correspondent banking and payment transparency sit beside that official list as industry articulation of questionnaires, payment message expectations and risk based prioritisation. The Group's public description of correspondent banking and payments as a priority focus area confirms the institutional link between FATF Recommendation 13 and bank practice standards, without converting industry guidance into binding international law.

Payments, trade rails and identity

Correspondent accounts are the clearing channel for many documentary credit reimbursements, open account settlements and guarantee related payments. Name screening and sanctions controls on those payments remain separate control families. Entity resolution of the respondent using the LEI, where held, reduces mismatched naming across onboarding and payment systems. FSB promotion of LEI use in cross border payments connects that identity standard to the same rails that correspondent KYC governs at relationship level.

Nested correspondent chains, where a respondent itself clears for further downstream banks, raise the same Recommendation 13 questions about the direct respondent and may create additional risk rating factors under national rules. The shell bank provisions remain the hard exclusion regardless of chain depth. Risk based EDD for higher risk respondents is a national and firm implementation layer built on top of the Recommendation 13 minimums.

Institutional summary

Correspondent banking KYC requirements are the Recommendation 13 package: respondent business and supervisory reputation information, AML/CFT control assessment, senior management approval, clarified responsibilities, payable through CDD assurance, and shell bank prohibitions. Ordinary CDD and beneficial ownership rules remain in force. Wolfsberg industry materials and LEI based entity identification support implementation; they do not rewrite the FATF rule text.