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Correspondent banking, the provision of services by one bank to another, has been a neglected area of academic research, and literature lacks a comprehensive theoretical framework to describe correspondent relationships. The bulk of previous studies have been conducted in the USA, where the regulatory environment places particular requirements on correspondent banking relationships that are difficult to generalise to countries such as Australia. This paper explores two theoretical frameworks for correspondent banking. The first sees correspondent banking in a financial contracting cost‐reduction framework, in line with theoretical models of financial intermediation. The second framework is based on Dunning’s (1979) eclectic theory of international investment. Correspondent banking is viewed as a strategic tool to be used when a banking firm does not at present possess a full range of ownership‐specific, locational and internalisation advantages. The paper reviews the traditional and modern functions of correspondent banking and the structural arrangements that can be put in place to organise these activities. Case studies of two banks, operating in Australia, are used to illustrate the different strategic and structural approaches that can be utilised in respect of correspondent banking.

The paper aims to provide needed quantitative assessments of the impact of the withdrawal of correspondent banking to small emerging economies. It serves to identify the extent to which global anti-money laundering and combatting the financing of terrorism (AML/CFT) standards have influenced global banks’ decision to withdraw correspondent banking from some jurisdictions and the subsequent economic spillover effects on other non-bank financial entities.

Separate semi-structured surveys are issued to banks and money services businesses in Jamaica. Analysis of the responses identify the initial impact of de-risking on banks and the subsequent spillover effect on the other aspects of the financial system.

Results show significant spillover effects on money services businesses in their ability to transact in foreign currency with local commercial banks. Further, the scale of this impact is greater and costlier for smaller entities.

The economic consequences of the direct and indirect impact of correspondent bank de-risking are increased concentration risks and the potential expansion of shadow financial activity.

Tighter AML/CFT standards coupled with action of over-compliance has created unintended consequences for small developing countries across the globe. In Jamaica, commercial banks have either lost correspondent relationships or have had restrictions placed on the types of services available. It creates risks to economic growth and development through the hindrance of access to international financial markets for payments, trade and commerce.

This study is the first among research on the issue of correspondent bank de-risking to provide quantitative assessments of the impact on local financial systems.

This paper aims to discuss the issues about the recovery of the proceeds of crime, with emphasis on the USA situation.

The paper first sets forth the rationale for Section 981(k) of the Patriot Act and the requirements the government must satisfy to use it successfully to recover criminal proceeds. It then discusses the facts of a case where the new statute was applied and the legal arguments that were made when a foreign bank challenged the application of the statute in federal court. Finally, it discusses how the court resolved those issues in granting the government's suit for the recovery of the money.

Finds that Section 981(k), while controversial, has proven effective in allowing the Government of the USA to recover property from wrongdoers in the types of cases where it was intended to be applied.

Shows that Section 981(k) is an innovative and controversial addition to the arsenal of weapons that federal law enforcement authorities in the USA can use to recover the proceeds of crime.

The paper aims to examine the role played by international shell companies in Latvian-type correspondent banking, who creates the shell companies according to what criteria and the resulting money laundering operations for financial flows from Russia and the former Soviet Union.

This paper draws on journalist and non-governmental organisations investigations, financial intelligence unit reports, interviews with participants, whistleblower reports and public domain databases to research financial activities shrouded in secrecy with connections to corruption and organised crime.

Latvian-type correspondent banking generates for its clients from the former Soviet Union anonymous shell companies en masse across diverse onshore and offshore jurisdictions. The shell companies are vehicles for moving white, grey and black funds from Russia, Ukraine and other former Soviet countries through international correspondent banking relations to offshore savings accounts and business suppliers. The creation and administration of the shell companies is handled by para-bank “business introducer” structures that dilute customer documentation.

This paper does not address the specifics of Latvia’s domestic anti-money laundering (AML) legislation and enforcement thereof.

Attempts to eradicate shell companies in individual jurisdictions, for instance, by introducing registers of beneficial ownership of companies, may merely displace the phenomenon to other jurisdictions, and thus treat the symptom not the disease.

This is the first scholarly study of mass use of international shell companies by Latvian-type banking in connection with financial flows from Russia, Ukraine and the former Soviet Union.

An exhaustive analysis of the current state of play of both the old and new law and the regulations promulgated thereunder. A one‐stop analysis of the state of the requirements under the USA Patriot Act and particularly how it affects broker‐dealers.

The increased use of checks in nonlocal payments at the end of the nineteenth century presented problems for their clearing and collection. Checks were required to be paid in full (at par) only when presented directly to the drawn-upon bank at its counter. Consequently, many, primarily rural or small-town, banks began to charge remittance fees on checks not presented for collection in person. Such fees and the alleged circuitous routing of checks in the process of collection to avoid them were widely criticized defects of the pre-Federal Reserve payments system. As the new Federal Reserve established its own system for check clearing and collection, it also took as an implicit mandate the promotion of universal par clearing and collection. The result was a bitter struggle with non-par banks, the numbers of which initially shrunk dramatically but then rebounded. A 1923 Supreme Court decision ended the Fed’s active (or coercive) pursuit of universal par clearing, and non-par banking persisted thereafter for decades. Not until the Monetary Control Act of 1980 was universal par clearing and true monetary union, in which standard means of payment are accepted at par everywhere, achieved.

The English banking system before the Panic of 1825, apart from the Bank of England, which maintained a monopoly of joint-stock banking, was one of private partnerships both in London and in the provinces, most of which were independent unit banks. Since remittance was the principal function of country banks at this time close ties in the form of correspondent relations developed between country banks and London agents, similar to the structure prevailing in the United States later in the nineteenth century between New York and interior banks. Although efficient in the transfer of funds across space, these networks also proved to be quite efficient in the transmission of financial pressures during panics.

To educate on AML legal requirements and issues relative to foreign correspondent accounts, and give practical advice on relatively low-burdensome measures firms can take to help them achieve compliance in this challenging area.

Summarizes AML requirements relevant to foreign correspondent accounts, discusses two related FINRA settlements involving the alleged failure to obtain and verify beneficial ownership information, reviews ongoing regulatory and legislative initiatives (including a FinCEN initiative to require firms to identify beneficial owners and verify their identities), and suggests certain due diligence procedures firms can use to screen foreign correspondent accounts.

One of the fundamental risks that firms face when dealing with foreign correspondent accounts is not knowing their customers' customers. While the current regulatory framework does not, in most cases, explicitly require firms to obtain beneficial ownership information, the practical reality seems to be that obtaining and verifying such information, where possible, could pay substantial dividends in terms of risk assessment and avoidance.

In some cases, a variety of cost-effective screening measures can be sufficient for a firm to identify concrete risks so that it may take steps to reduce its own regulatory exposure. Firms should not discount the simple for the elaborate, and should take advantage of the several, cost-effective AML tools and resources that are readily available.

Practical guidance for AML officers and other compliance and legal professionals by an experienced financial institutions lawyer.

The purpose of this paper is to increase insights into the withdrawal of correspondent banks (CBs) from developing markets.

A case study of a small offshore bank in Belize was conducted using information collected from the bank’s CEO and compliance officer through semi-structured interviews. The interview data were triangulated with data from relevant laws in Belize and literature review.

Compliance with international standards is onerous on small banks, but necessary to level the playing field and protect the global system. Practices within small banks effectively combat money laundering, but remain unsung because size and geographic location of banks influence perceptions about the banks. The approach to de-risking was overreaching and unfair.

The findings are specific to one offshore bank, but create awareness of Belize banking practices to mitigate money laundering risks. The results could influence regulators, international organizations and CBs to pierce through to the bank level to assess risks and determine CB relationships.

This is the first study providing firsthand accounts of efforts by a small Belize bank to comply with international standards and remain connected to the global financial system. The study highlights a critical weakness in employing a risk-based approach to rate banks.