Section 7M: Provision on Cross-Border Correspondent Banking

1) Financial institutions shall undertake the following measures while entering into cross-border correspondent banking and similar relationships or conducting transactions:

(a) To identify and verify the identification of the respondent institution,

(b) To get adequate information on the nature of the respondent institution‘s activities,

(c) To fully understand the nature of the respondent‘s business from the information pursuant to clause (b),

(d) To evaluate the respondent institution‘s reputation and the quality of supervision to which it is subject, including whether it has been subject to a money laundering or terrorism financing investigation or regulatory action based on publicly available information,

(e) To evaluate the controls implemented by the respondent institution with respect to money laundering or terrorist financing and to ascertain their adequacy and effectiveness,

(f) To obtain approval from senior management before establishing a correspondent banking relationship,

(g) To understand and establish an arrangement on the respective responsibilities of each party under the relationship regarding anti-money laundering and combating  financing of terrorism,

(h) To ensure whether the respondent institution has conducted customer due diligence on customers in the case of a payable through account, has implemented mechanisms for ongoing monitoring with respect to its customers, and is capable of providing relevant identifying information on request,

Explanation: ¹For the purposes of this section, “payable through account” means a correspondent account used directly by a third party in connection with a transaction.

(i) Not to enter into or continue correspondent banking relations with a shell bank,

(j) To satisfy itself that a respondent financial institution does not permit its accounts to be used by a shell bank.

2) A financial institution shall comply with sub-section (1) provisions in the conduct of business relations or transactions relating to cross-border correspondence banking carried out by itself or on behalf of a customer.

^{1Added by Act, 2080 to amend certain Acts relating to Prevention of Money Laundering and Promotion of Business Environment.}