WASHINGTON — The Office of the Comptroller of the Currency issued long-awaited guidance Wednesday directing banks to follow a series of best practices before deciding to cut off correspondent banking relationships.
The bulletin says banks should conduct periodic risk evaluations of foreign correspondent institutions and make decisions on a bank-by-bank basis.
"Banks with a clear understanding of the risk profiles of [foreign correspondent banks] may be more capable of providing banking services to such customers that historically have been considered higher risk," the OCC said.
The guidance advises banks to base their decisions to cut off correspondent banking relationships primarily on periodic risk evaluations.
Any final determination should be made with an eye toward specific anti-money-laundering risks posed by the foreign bank, and take into account its ability to manage the risks, the OCC said. In addition, banks should establish a clear structure dedicated to evaluating its risk evaluation procedures — like an oversight committee — and keep senior management informed of subsequent decisions.
U.S. banks should avoid "terminating entire categories of foreign correspondent account relationships without regard to the risks presented by individual foreign financial institutions," the OCC said, "unless specifically required by law."
They should also consider other, less severe options and allow the foreign bank to offer mitigating information and at least provide enough notice to allow it to seek out another partner.
In the guidance, the OCC stressed that it is not directly responsible for banks' decisions to cut off their correspondent banking ties. "A decision to terminate a banking relationship or to exit a line of business generally resides with the bank," the agency said.
However, the OCC also acknowledged that sometimes banks were legally required to terminate such relationships.
"In some cases, the closure of foreign correspondent accounts is required by law," the OCC said, adding that a lack of transparency in those decisions had left banks vulnerable to reputational risks and potential lawsuits.
