What Should Auditors Know About Correspondent Banking Activities and De-Risking?

Nadine Abouzeid Harb, CAMS-Audit

“De-Risking” is a recent trend in the global financial market where correspondent banks are restricting and terminating their relationships with other banks and financial institutions that are classified as high risk or are operating in high risk countries. These actions are mainly due to two issues:

  • Increase compliance costs: Lately, Know Your Customers’ Customers (“KYCC”) being done by the correspondent banks increased compliance costs since extra efforts are exerted by the correspondent banks to review and monitor the customers of the respondent banks classified as high risk or are operating in high risk countries; and,
  • Generate insufficient volumes: Ability of the respondent banks to generate sufficient volumes to recover the compliance costs.

Download PDF