7‑1 Requirements for due diligence asses7‑1 Requirements for due diligence assessment

7‑1 Requirements for due diligence assessment

(1) For the purposes of paragraph 96(1)(a) of the Act, this section sets out requirements for the due diligence assessment to be carried out by a financial institution (the correspondent) in relation to an entry into a correspondent banking relationship with another financial institution (the respondent) that will involve a vostro account. (2) The due diligence assessment required to be carried out is an assessment of the risks of money laundering, financing of terrorism, proliferation financing and other serious crimes associated with the entry into the correspondent banking relationship. (3) In carrying out the due diligence assessment, the correspondent must consider the following matters: (a) the ownership, control and management structures of: (i) the respondent; and (ii) the ultimate parent of the respondent (if any); (b) the nature, size and complexity of the respondent’s business, including: (i) the products and services offered by the respondent, and the delivery channels by which it provides services; and (ii) the kinds of customers that the respondent has; and (iii) the kinds of transactions that would be carried out on behalf of the respondent’s customers as part of the correspondent banking relationship and the services that would be provided to the respondent’s customers that relate to such transactions; (c) the country or countries: (i) in which the respondent operates or of which it is a resident; and (ii) if the ultimate parent of the respondent (if any) has group‑wide anti‑money laundering and counter‑terrorism financing systems and controls, and the respondent operates within the requirements of those controls—in which the ultimate parent operates or of which it is a resident; (d) the existence and quality of any anti‑money laundering and counter‑terrorism financing regulation and supervision in the country or countries identified under paragraph (c) and the respondent’s compliance practices in relation to those regulations; (e) the appropriateness of the respondent’s anti‑money laundering and counter‑terrorism financing policies, procedures, systems and controls; (f) publicly available information relating to the reputation of the respondent and the members (if any) of the business group of which the respondent is a member that are a remitter, virtual asset service provider or financial institution, including whether the respondent or any of those members has been the subject of: (i) a regulatory investigation relating to implementation of anti‑money laundering, counter‑terrorism financing or sanctions obligations; or (ii) adverse regulatory action relating to implementation of anti‑money laundering, counter‑terrorism financing or sanctions obligations; or (iii) an investigation or criminal or civil proceedings relating to money laundering, financing of terrorism or other serious crimes; (g) if the correspondent is to maintain vostro accounts that can be accessed directly by the customers of the respondent (payable‑through accounts)—whether the respondent: (i) would undertake initial customer due diligence and ongoing customer due diligence in relation to those customers; and (ii) would be able to provide to the correspondent, on request, information collected when the respondent undertakes initial customer due diligence and ongoing customer due diligence in relation to those customers and the reliable and independent data used to verify the information.