The Bad Guys are Going the Correspondent Banking Route

By Yaron Hazan, Financial Crimes Subject Matter Expert 3 months agoNo Comments
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Correspondent banking is like jamming your big toe on a door jam. It hurts but you still have to keep moving.  Banks continue to have highly visible and damaging correspondent banking failures but they still have to deal with cross-border payments, whether they have the financial crime controls in place or not.  It was so bad during the early 2000’s that banks were caught with their hands in the till – hiding originating banks in order to avoid sanctions.

They’re right to be concerned, scared, worried – pick your favorite anxiety-laden word. Regulatory expectations and global standards, as published by the FATF for example, categorize  correspondent banking as high risk and should be addressed with strictest of controls. Meanwhile, it remains a safe haven for money launderers, those financing terrorism, human traffickers and other bad actors.

Banks like windows!  They want full transparency when it comes to customer activity, but when it comes to correspondent banking, the windows are small and dirty. Originating banks must rely on third party banks and their AML controls.  Criminals take advantage of the bank’s weak legacy systems and lack of standards. They can easily find the weak spots in the system, open faulty accounts and move around their dirty money.

Although a bit more challenging, criminals are able to legitimize their transactions by opening destination accounts. In so doing, they can mask high volume funds flowing into an account, in a way that the bank will not suspect anything egregious.  Since KYC  isn’t monitored, and is isolated from global payments, the chances a bank will catch this suspicious activity is slim to none.  And since this multi-station banking is inherently difficult to secure, it makes it easier for the bad guys.

Things sound grim don’t they?  Well maybe, BUT legacy techniques, legacy AI is notoriously poor at dealing with a bank’s entire transaction flow.  Our IntuitiveAI algorithms can easily see each and every connection within the entire network of banks which are part of every transaction they conduct. It uncovers both the risks and safe havens to easily recognize laundromats. Thetaray for Correspondent banking covers the entire correspondent banking workflow.

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