Cash correspondent bank monitoring: The industry aligns in response

Abstract

Recent years have seen a series of scandals in the transaction banking industry, with several groups falling foul of anti-money laundering regulation, sanction busting and other systemic failures. Regulators are now responding to these failures, requiring banks to perform third-party oversight of their correspondent bank agents, and banks are scrambling to put monitoring programmes in place — with mixed success. In this paper, the author discusses why banks should be monitoring their cash agent banks, which operational risks they should look out for and how the industry has worked together to mutualise a service solution. A working group of 25 of the leading banking groups globally defined a managed services solution to meet their regulatory and commercial obligations and facilitate a comprehensive benchmarking capability of service providers. The service, which is managed by Thomas Murray specialists, incorporates document follow-up, response completion support and, where applicable, site visits to respondent banks to support participation. The reporting is an operational risk assessment per bank, benchmark analytics (by market, currency, regionally and globally), and market profiles along with ongoing surveillance monitoring. With this industry initiative, the lack of cash correspondent banking scrutiny, especially in today’s remote operational environment, has collectively been addressed.