CAMS · Question #403
In which three situations is correspondent banking most vulnerable to money laundering? Choose 3 answers
The correct answer is A. When allowing foreign banks to use the correspondent account to conduct large financial B. When allowing the correspondent bank account to be used as a payable through account (PTA) C. When allowing the correspondent bank account to be used by other banks. Correspondent banking is most vulnerable to money laundering when foreign banks, payable-through accounts, or nested bank relationships gain access to the correspondent account, enabling layered and obscured transactions.
Question
In which three situations is correspondent banking most vulnerable to money laundering? Choose 3 answers
Options
- AWhen allowing foreign banks to use the correspondent account to conduct large financial
- BWhen allowing the correspondent bank account to be used as a payable through account (PTA)
- CWhen allowing the correspondent bank account to be used by other banks
- DWhen allowing financial institutions, without proper due diligence, to access correspondent
How the community answered
(59 responses)- A80% (47)
- D20% (12)
Why each option
Correspondent banking is most vulnerable to money laundering when foreign banks, payable-through accounts, or nested bank relationships gain access to the correspondent account, enabling layered and obscured transactions.
Allowing foreign banks to use the correspondent account for large transactions creates the risk of processing funds from jurisdictions with weaker AML controls, making it difficult to trace the true origin of those funds.
A payable-through account allows third-party customers of a foreign bank to directly conduct transactions through the correspondent account, effectively bypassing the correspondent bank's own customer due diligence requirements.
Allowing other banks to use the correspondent account creates nested correspondent banking relationships that add layers of intermediaries, making it extremely difficult to identify the true beneficial owners behind the transactions.
While lack of due diligence is a contributing control failure, it describes the absence of a safeguard rather than a distinct structural scenario that independently and specifically creates a correspondent banking vulnerability.
Concept tested: Correspondent banking money laundering vulnerability scenarios
Source: https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Guidance-correspondent-banking-services.html
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