PUBLIC/OFFICIAL RELEASE // EXTERNAL

Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and

Agents for Service of Legal Process

PROHIBITION ON CORRESPONDENT ACCOUNTS FOR

FOREIGN SHELL BANKS; RECORDS CONCERNING

OWNERS OF FOREIGN BANKS AND AGENTS FOR SERVICE

OF LEGAL PROCESS

Objective: Assess the bank’s compliance with the Bank Secrecy Act (BSA) regulatory

requirements regarding the prohibition on correspondent accounts for foreign shell banks.

Assess the bank’s compliance with BSA regulatory requirements concerning records of owners

of foreign banks and agents for service of legal process.

Regulatory Requirements

This section outlines the regulatory requirements for banks in 31 CFR Chapter X regarding the

prohibition on correspondent accounts for foreign shell banks and records concerning owners of

foreign banks and agents for service of legal process. Specifically, it covers:

 31 CFR 1010.605 (Definitions)

 31 CFR 1010.630

Prohibition on Correspondent Accounts for Foreign Shell Banks

Banks are prohibited from establishing, maintaining, administering, or managing a correspondent

account in the United States for, or on behalf of, a foreign shell bank, unless the foreign shell

bank is a regulated affiliate.1 A foreign shell bank is defined as a foreign bank without a physical

presence2 in any country.3

Many shell banks have been associated with jurisdictions with weak financial supervisory and

enforcement regimes and have been misused to facilitate money laundering. Congress addressed

shell banks in section 313 of the USA PATRIOT Act, determining that they pose such a

significant risk for money laundering that an absolute ban on correspondent accounts with such

entities is justified.4 The intent of the prohibition is to prevent shell banks from gaining direct or

indirect access to the U.S. financial system.

Banks must take reasonable steps to ensure that any correspondent account established,

maintained, administered, or managed in the United States for a foreign bank is not being used

1 31 CFR 1010.630(a)(1); see also 31 CFR 1010.605(n). A “regulated affiliate” is a foreign shell bank that is an

affiliate of a depository institution, credit union, or foreign bank that maintains a physical presence in the United

States or a foreign country, as applicable; and is subject to supervision by a banking authority in the country

regulating such affiliated depository institution, credit union, or foreign bank. 2 See 31 CFR 1010.605(l) for definition of physical presence.

3 31 CFR 1010.605(g). 4 FinCEN, Final rule “Correspondent Accounts for Foreign Shell Banks; Recordkeeping and Termination of

Correspondent Accounts for Foreign Banks,” 67 Fed. Reg. 60562, 60564 (Sept. 26, 2002).

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PUBLIC/OFFICIAL RELEASE // EXTERNAL

Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and

Agents for Service of Legal Process

by that foreign bank to indirectly provide banking services to a foreign shell bank, such as with

nested correspondent accounts.5

Records of Owners of Foreign Banks and Agents for Service of Process

Banks that maintain correspondent accounts in the United States for foreign banks must maintain

records in the United States identifying the owners6 of each such foreign bank whose shares are

not publicly traded.7 Banks must also record the name and street address of a person who resides

in the United States and who is authorized and has agreed to be an agent to accept service of

legal process for records regarding such an account.

Safe Harbor

Banks are “deemed to be in compliance” with the prohibition on correspondent accounts for

foreign shell banks and the requirements to maintain records of owners of foreign banks and

agents to accept service of legal process if the bank obtains a certification or recertification from

the foreign bank.8 The certification or recertification must be provided at least once every three

years, on or before the three-year anniversary of the initial or previous certification. A bank may

satisfy the safe harbor provision by obtaining a copy of a foreign bank’s certification or

recertification either directly from the foreign bank or indirectly, such as from a central database

or from another financial institution, providing that the form and content of the certification are

sufficient and reliable.9 The U.S. Department of the Treasury, working with the financial

industry and federal banking and law enforcement agencies, developed a certification process to

assist banks in complying with these recordkeeping provisions. This process includes

certification and recertification forms.10 While banks are not required to use these forms, the

forms are designed to provide a means of complying with the requirements.

Interim Verification

Banks are responsible for reviewing certifications for reasonableness and accuracy. If at any

time a bank knows, suspects, or has reason to suspect that any information contained in a

5 Nested correspondent banking refers to the use of a correspondent relationship by one or more financial institutions

through their relationships with the direct customer of the correspondent bank. In the foreign correspondent banking

relationship, the nested foreign financial institutions conduct transactions and obtain access to other financial

services without being direct customers of the U.S. correspondent bank. For more information, see the subsection

on Nested (Downstream) Correspondent Banking in the Due Diligence Programs for Correspondent Accounts for

Foreign Financial Institutions section of this Manual.

6 For purposes of this requirement, “owner” means any person who, directly or indirectly, owns, controls, or has the

power to vote 25 percent or more of any class of voting securities or other voting interests of a foreign bank, or

controls in any manner the election of a majority of the foreign bank’s directors (or individuals exercising similar

functions). 31 CFR 1010.605(j). Section 6308 of the AML Act of 2020 amended 31 USC 5318(k)(3)(B)(i) to state

that the term “owner” includes the owners of record and the beneficial owners of the foreign bank. 7 31 CFR 1010.630(a)(2)(ii). A bank need not maintain records of the owners of any foreign bank that is required to

file a form FR Y-7 (Annual Report of Foreign Banking Organizations) with the Federal Reserve Board.

8 31 CFR 1010.630(b).

9 FinCEN (February 3, 2006), FIN-2006-G003 “Frequently Asked Questions, Foreign Bank Recertifications under

31 CFR 103.177.” 10 Certification Regarding Correspondent Accounts for Foreign Banks and Recertification Regarding Correspondent

Accounts for Foreign Banks (OMB Control Number 1506-0043).

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PUBLIC/OFFICIAL RELEASE // EXTERNAL

Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and

Agents for Service of Legal Process

certification (or recertification) provided by a foreign bank, or any other information the bank

relied on is no longer correct, the bank must request that the foreign bank verify or correct such

information or take other appropriate measures to determine the accuracy of the information or to

obtain correct information.11

Closure of Correspondent Accounts When Unable to Obtain Certification

Information

The regulation contains specific provisions as to when banks must close correspondent accounts.

If the bank is unable to obtain the required certification (or recertification) or is unable to obtain

documentation of the required information within 30 calendar days after the date the account is

established, and at least once every three years thereafter, the bank shall close all correspondent

accounts with that foreign bank. The closure must be within a commercially reasonable time,

and the bank must not permit the foreign bank to establish any new positions or execute any

transaction through the account, other than transactions necessary to close the account.12

When conducting an interim verification, if the bank has not received the requested information

within 90 calendar days, the bank shall close all correspondent accounts with that foreign bank.

The closure must be within a commercially reasonable time, and the bank must not permit that

foreign bank to establish any new positions or execute any transaction through the account, other

than those transactions necessary to close the account.13

A bank may not reestablish any account closed or establish any other correspondent account for

that foreign bank until it obtains the required certification or recertification information, as

appropriate.14

Recordkeeping Requirements

A bank must retain the original of any documents provided by a foreign bank, and the original or

copy of any document otherwise relied on for the purposes of this regulation, for at least five

years after the date that a bank no longer maintains any correspondent account for that foreign

bank.15

Examiner Assessment of Compliance with the Prohibition on Correspondent

Accounts for Foreign Shell Banks and Requirements Concerning Records of

Owners of Foreign Banks and Agents for Service of Legal Process

Examiners should assess the adequacy of the bank’s policies, procedures, and processes related

to the prohibition on correspondent accounts for foreign shell banks and requirements concerning

records of owners of foreign banks and agents to accept service of legal process. Specifically,

examiners should determine whether these internal controls are designed to mitigate and manage

money laundering, terrorist financing, and other illicit financial activity risks and to comply with

requirements related to the prohibition on correspondent accounts for foreign shell banks and

11 31 CFR 1010.630(c). 12 31 CFR 1010.630(d)(2).

13 31 CFR 1010.630(d)(3). 14 31 CFR 1010.630(d)(4).

15 31 CFR 1010.630(e).

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PUBLIC/OFFICIAL RELEASE // EXTERNAL

Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and

Agents for Service of Legal Process

requirements concerning records of owners of foreign banks and agents to accept service of legal

process. Examiners may review information, such as independent testing or audit reports, to aid

in their assessment of the bank’s compliance with the prohibition on correspondent accounts for

foreign shell banks and requirements concerning records of owners of foreign banks and agents

to accept service of legal process. Refer to the Assessing the BSA/AML Compliance Program -

BSA/AML Internal Controls section of this Manual for more information.

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PUBLIC/OFFICIAL RELEASE // EXTERNAL

Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and

Agents for Service of Legal Process Examination and Testing Procedures

PROHIBITION ON CORRESPONDENT ACCOUNTS FOR

FOREIGN SHELL BANKS; RECORDS CONCERNING

OWNERS OF FOREIGN BANKS AND AGENTS FOR SERVICE

OF LEGAL PROCESS EXAMINATION AND TESTING

PROCEDURES

Objective: Assess the bank’s compliance with the Bank Secrecy Act (BSA) regulatory

requirements regarding prohibition on correspondent accounts for foreign shell banks. Assess

the bank’s compliance with BSA regulatory requirements concerning records of owners of

foreign banks and agents for service of legal process.

1. Review the bank’s policies, procedures, and processes related to the prohibition on

correspondent accounts for foreign shell banks and requirements concerning records of

owners of foreign banks and agents to accept service of legal process. Verify that the bank’s

policies, procedures, and processes, at a minimum:

 Prohibit the bank from establishing, maintaining, administering, or managing a

correspondent account in the United States for, or on behalf of, a foreign shell bank.16

This includes reasonable steps to ensure that any correspondent account in the United

States is not being used to indirectly provide banking services to a foreign shell bank.

 Maintain records in the United States identifying the owners of each foreign bank whose

shares are not publicly traded and the name and street address of a person who resides in

the United States and is authorized, and has agreed to be, an agent to accept service of

legal process.

 Provide for obtaining, when the account is established and at least once every three years,

a certification or recertification from the foreign bank with current information required

on the bank, the owners, and the process agents.

 Provide for reviews of reports of owners and agents (certifications or recertifications) for

reasonableness and accuracy, including steps to request that the foreign bank verify or

correct information, should the bank know, suspect, or have reason to suspect that any

information is no longer correct.

 Provide for closures of correspondent accounts within a commercially reasonable time

when the bank is unable to obtain a certification or recertification within 30 calendar days

after the date the account is established, and at least once every three years thereafter.

 Provide for closures of correspondent accounts within a commercially reasonable time

when the bank has not obtained verification of the information or corrected information

within 90 calendar days after the date of undertaking the verification.

16 31 CFR 1010.630(a)(1); see also 31 CFR 1010.605(n). A “regulated affiliate” is a foreign shell bank that is an

affiliate of a depository institution, credit union, or foreign bank that maintains a physical presence in the United

States or a foreign country, as applicable; and is subject to supervision by a banking authority in the country

regulating such affiliated depository institution, credit union, or foreign bank.

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PUBLIC/OFFICIAL RELEASE // EXTERNAL

Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and

Agents for Service of Legal Process Examination and Testing Procedures

 Prohibit the bank from reestablishing any account closed or establishing any other

correspondent account for such foreign bank until it obtains the required information.

 Provide for retention of the original or copy of any document relied upon for at least five

years after the date that the bank no longer maintains any foreign correspondent account

for such foreign bank.

2. On the basis of a risk assessment, prior examination reports, and a review of the bank’s audit

findings, if appropriate, select a sample of foreign correspondent bank accounts. From the

sample selected, determine whether the bank:

 Maintains documentation to support that it does not establish, maintain, administer, or

manage correspondent accounts for, or indirectly provide services to, foreign shell banks.

 Maintains records identifying the owners of each foreign bank whose shares are not

publicly traded and includes the name and street address of a person who resides in the

United States and who is authorized, and has agreed to be, an agent to accept service of

legal process.

 Obtains an initial certification and a recertification at least once every three years from

each foreign bank.

 Maintains an interim verification program that reviews certifications and recertifications

for reasonableness and accuracy and details the steps taken to verify and, if applicable,

correct information.

 Closes correspondent accounts within a commercially reasonable time when unable to

obtain certifications within 30 calendar days after the date the account was established,

and recertifications at least once every three years thereafter.

 Closes correspondent accounts within a commercially reasonable time when unable to

obtain verification of the information or corrected information within 90 calendar days

after the date of undertaking the verification.

 Maintains documentation that the bank has not reestablished any account closed or

established any other correspondent account for a foreign bank, until it obtains the

required certification or recertification information, as appropriate.

 Retains the original or copy of any document relied upon for purposes of this regulation

for at least five years after the date that the bank no longer maintains any foreign

correspondent account for such foreign bank.

3. On the basis of examination and testing procedures completed, form a conclusion about the

adequacy of policies, procedures, and processes the bank has developed to meet Bank

Secrecy Act (BSA) regulatory requirements associated with the prohibition on correspondent

accounts for foreign shell banks and requirements concerning records of owners of foreign

banks and agents for service of legal process.

FFIEC BSA/AML Examination Manual 6 July 2023