MADISON, Wis.—The Financial Action Task Force’s new guidance on de-risking related to correspondent banking and anti-money laundering is good news for credit unions, asserts one analyst.
“This should make it easier for credit unions to establish and maintain correspondent bank accounts,” said Michael Edwards, VP of advocacy and general counsel for the World Council of Credit Unions. “Since the Financial Action Task Force is the international standard setting body on anti-money laundering rules, and the U.S. Treasury is an FATF member, we expect this guidance to end up being part of FinCEN guidance within the next two months.”
Edwards said the new guidance, issued last week and available in CUToday.info’s The gov, is much more extensive than the Bank Secrecy Act FAQs on correspondent banking issued at end of August, and is intended to try to keep banks that are in the correspondent banking business from closing accounts of other financial institutions.
“One thing this guidance clarifies is that absent red flags, an institution is not responsible for ‘know your customer’s customer,’” Edwards said. “That is good because that means the correspondent bank is not responsible for the credit union’s members. It also provides guidance on the correspondent bank’s ongoing monitoring and due diligence, which was not previously clear and caused problems.”
The guidance also uses the term “corresponding institution” and “responding institution,” rather than “corresponding bank” and “responding bank.”
“This is something we asked for, trying to make sure there was no confusion between corporate credit unions and natural person credit unions,” Edwards said. “Again, this guidance overall is good news for credit unions because it helps clear up a lot of ambiguity that caused problems for CUs a few years ago. There were a bunch of credit unions in Ohio and West Virginia that had their correspondent accounts closed because these issues were not clear.”