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Correspondent Banking Relationships Facing Greater Scrutiny For Money Laundering Violations

March 01, 2001

By Paul Hastings Professional

Federal legislative and executive branch scrutiny of correspondent banking relationships for money laundering violations is dramatically increasing, and greater federal investigation and enforcement actions involving correspondent banking seem certain to follow. Recently, a U.S. Senate Subcommittee issued a highly critical report of correspondent banking, suggesting that, in many cases, such banking relationships are a breeding ground for money laundering. Legislation was introduced in both the House and the Senate in March 2001 to impose greater restrictions on U.S. banks establishing correspondent relationships with foreign banks. While the primary focus of anti-money laundering efforts in the past has been identifying and monitoring the activities of bank customers, this new initiative focuses on banks relationships with foreign financial institutions.