1. Correspondence Accounts and Wire Transfers
James Wright
OTA Advisor Romania

2. Correspondent Services
Money Transfers
Loans
Letters of Credit
Other

3. Concerns Money laundering through shell banks Nested accounts
US Congress
FATF

4. Proper due diligence
Obtain information on bank’s ownership and management
Obtain information on the nature, and volume of transactions expected
Review bank's financial statements

5. Due Diligence .Evaluate credit worthiness
Determine the bank’s primary line of business
Verify the bank’s licenses

6. Due diligence
. Determine that the bank has a fixed, operating office in the licensing jurisdiction
Evaluate the overall adequacy of banking supervision in the jurisdiction of the respondent bank including anti-money laundering laws and bank regulation procedures

7. Due diligence Make inquires to the correspondents local branch bank
Make inquires with bank rating agencies
Obtain bank references
Complete customer profile

8. Due diligence Determine if the bank has relationships with shell banks
Determine how the bank monitors international correspondent accounts
Determine how often site visits are made

9. Due Diligence
Form an opinion about the bank’s money laundering controls on correspondent accounts
Perform monitoring for changes in transaction type and volume

10. Wire Transfers and Monitoring
Manual
IT systems

11. SWIFT Wire Transfers
SWIFT is an unified international financial transaction processing and transmission system
It is simply a message transfer, not a funds transfer system
SWIFT does not become involved in the process of settling or clearing funds (as do Fed wire and CHIPS)
The settlement of funds process is handled by the banks themselves through the proper debiting and crediting of their correspondent accounts

12. SWIFT Wire Transfers The next slides will show:
The flow of messages and information between correspondent banks and their clients
The flow of funds between correspondent banks and their clients

13. Wire Transfer Notification
ORIGINATOR
BENEFICIARY
BANK OF AMERICA
Wire Transfer Notification
Wire Transfer Order
CHIPS
Automated Clearing & Settlement
Wire Transfer Order
ALPHA BANK
CITIBANK
SWIFT Message (MT 103)
SERIAL SWIFT wire

14. (:20 Transaction Reference Number
S Sample Wire Transfer message traveling in SWIFT Format to RECEIVING Bank:
(:20 Transaction Reference Number
(0520/PAY
(:32 Value Date, Currency, and Amount
(12 Dec 2003
(Euros
310,000
(:50 Ordering Customer
(ABC Importing

15. ( ABC Importing 222 Dacca Street. Bucharest Romania.
( ABC Importing
222 Dacca Street.
Bucharest Romania. 
(:57 Account with Institution
JPiraeusBankGB2L
Bucharest, Romania 
(:59John Tandy
UNION BANK
45 BAHNHOFSTRASSE
Cayman Islands
:70 Details of Payment/RFB/INV.NO , 10552, 10561, 10580
 (PAYMENT OF THE FOLLOWING INVOICES)

16. Suspicious characteristics
Dollar amount
Destination
Corporation or individual
Type of corporation

17. Suspicious Wire transfers
Large dollar amounts where the correspondent account has not been used for similar transfers
Unusual large number of wire transfers
Transactions conducted in a burst of activity
Unexplained repetitive or unusual patterns of wire transfers
A request by a respondent bank to establish a relationship with or route a transaction through a bank not normally conducting business with foreign banks

18. Suspicious Wire Transfers
High value deposits or withdrawals not commensurate with the type of correspondent account or business of the correspondent bank
Wire transfers to individuals identified by law enforcement suspected in engaging in money laundering or terrorist financing.
Request by correspondent bank to be exempt money laundering reporting requirements

19. Suspicious Wire Transfers
Routing transfers through several jurisdictions or banks before entering respondent bank
Frequent or numerous wire transfers from or for the benefit of shell banks or high risk respondent banks
Wire transfers to or from a non cooperating country
Beneficiaries maintaining accounts at foreign banks which were subject of suspicious activity reporting
Reappearing beneficiary banks in offshore locations where one or more banks had relationships closed due to suspect activity

20. Examining Wire Transfers for
Suspicious Transactions
Compliance Officer/Examiner Procedure
Using a sample of high risk accounts, review wire transfer log for an appropriate period of time (3 months)
Follow up with a review of wire transfers, messages, customer files and accounts statements for a three-month period
Analyze wire transfers to determine whether the amounts, frequency and countries of origin/destination are consistent with the nature of the business or occupation of the customer
Be alert for any suspicious or unusual activities. Examine wire transfer log and other information and compare to the previous list of suspicious activities

21. Examining Wire Transfers for
Suspicious Transactions
Compliance Officer/Examiner Procedure
Using a sample of high risk accounts, review wire transfer log for an appropriate period of time (3 months)
Follow up with a review of wire transfers, messages, customer files and accounts statements for a three-month period
Analyze wire transfers to determine whether the amounts, frequency and countries of origin/destination are consistent with the nature of the business or occupation of the customer
Be alert for any suspicious or unusual activities. Examine wire transfer log and other information and compare to the previous list of suspicious activities

22. Bank Wire Transfer Log
Debit Credit Customer Beneficiary Name Country Amount Message Identification
1. x Harry Stone USA $1,000,200 In US $
  Marcus
2. x George Coffee Germany $ 500, In Euro
  Urethane
x Karen West Bulgaria $ ,900 BGL
  Voice
4. x ABC Importing Cayman Islands$ $400,000 In US $
  Cretv
x Foster Metal USA $ $522, In US$
Mueller
x Mikhail Popescu France E ,000 In Euro
Cretu
x Marin Chrisescu Romania E , In Euro

23. Link Analysis
A technique used to explore associations among a large number of objects of different types. People, profiles, bank accounts, businesses, wire transfers, and cash deposits.

24. Clustering
Analysis of wire transfers based on the frequency and dollar amount of each transfer
Reveals groups of transfers whose originators are highly similar., brokerage houses, industrial firms, or money transmitters.

25. Clustering
Allow banks and examiners to identify firms whose manufacturing firms whose financial transactions are atypical and examine them more closely to determine whether the corporation is merely a shell within which to conceal money laundering.

26. Conclusion
Banks must perform proper due diligence on new and existing correspondent accounts
Wire transfer are high risk area for money laundering and must be monitored