A bank maintains a number of United States (U.S.) dollar correspondent accounts for foreign financial institutions. Upon a routine review of a U.S. dollar correspondent account owned by Foreign Bank…

Question

Options

• AFile a report with the appropriate tax authorities in the jurisdictions of Foreign Bank A and Foreign
• BNotify senior management of the money laundering risks by allowing Foreign Bank A to maintain
• CNotify Foreign Bank A of the discovery and seek documentation supporting Foreign Bank A was
• DNotify other U.S. financial institutions who maintain U.S. dollar correspondent accounts for

• A
  5% (2)
• B
  10% (4)
• C
  70% (28)
• D
  15% (6)

Explanation

According to the FFIEC BSA/AML Manual, a U.S. bank should have policies, procedures, and processes to monitor and report suspicious activity associated with U.S. dollar drafts, which are bank drafts or checks denominated in U.S. dollars and made available at foreign financial institutions. These drafts are drawn on a U.S. correspondent account by a foreign financial institution and can be used to facilitate money laundering or terrorist financing. The manual states that "[t]he potential for facilitating money laundering or terrorist financing, OFAC violations, and other serious crimes increases when a U.S. bank is unable to identify and adequately understand the transactions of the ultimate users (all or most of whom are outside of the United States) of its account with a foreign correspondent." Therefore, the compliance officer should notify Foreign Bank A of the discovery and seek documentation supporting Foreign Bank A was collusive and a willing partner with Foreign Bank B in the activity, as this would indicate a breach of the correspondent banking agreement and a possible violation of U.S. laws and regulations. The compliance officer should also document the findings and actions taken, and escalate the matter to senior management and the board of directors as appropriate. The other options are not the best steps for the compliance officer to take. Option A is not relevant, as the issue is not related to tax evasion, but to money laundering or terrorist financing. Option B is premature, as the compliance officer should first verify the nature and extent of the suspicious activity and the involvement of Foreign Bank A before deciding whether to terminate or restrict the correspondent relationship. Option D is not feasible, as the compliance officer does not have the authority or the means to notify other U.S. financial institutions who maintain U.S. dollar correspondent accounts for Foreign Bank A and Foreign Bank B, and this could also interfere with ongoing investigations or law enforcement actions.

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