Correspondent and nested activity

Automated and manual transaction monitoring shall identify unusual or suspicious activity using risk-based scenarios and thresholds.

Foreign correspondent accounts shall undergo enhanced due diligence including assessing AML controls of the respondent bank.

Financial institutions may not keep anonymous accounts or accounts in obviously fictitious names and must, by a principle set out in law, undertake customer due diligence when establishing a business relationship, carrying out an occasional transaction above USD or EUR 15,000 or a payment or value transfer covered by INR.16, when money laundering or terrorist financing is suspected, or when they doubt previously obtained identification data: identify and verify the customer from reliable independent sources; identify the beneficial owner and take reasonable measures to verify that identity, understanding the ownership and control structure of legal persons and arrangements; understand and where appropriate obtain information on the purpose and intended nature of the relationship; and conduct ongoing due diligence and transaction scrutiny consistent with the customer's profile including, where necessary, the source of funds. The extent of each measure follows a risk-based approach; verification takes place before or during establishment of the relationship, or as soon as reasonably practicable after it where risks are managed and business would otherwise be interrupted; an institution that cannot complete CDD does not open the account or perform the transaction, or terminates the relationship, and considers a suspicious transaction report; the requirements apply to new customers and, on materiality and risk, to existing ones. The Interpretive Note sets the risk-based approach, enhanced and simplified measures, the specific measures for legal persons, arrangements and beneficiaries of life insurance, reliance on prior verification and the timing rules.

For cross-border correspondent banking and similar relationships, financial institutions, beyond normal CDD, gather enough information to understand the respondent's business and to determine from public information its reputation and the quality of its supervision including any money laundering or terrorist financing investigation or regulatory action, assess its AML/CFT controls, obtain senior management approval before establishing new relationships, clearly understand each institution's responsibilities, and for payable-through accounts satisfy themselves that the respondent has conducted CDD on customers with direct access and can supply CDD information on request; they may not enter into or continue a correspondent relationship with a shell bank and must satisfy themselves that respondents do not allow their accounts to be used by shell banks; the Interpretive Note extends the requirements to similar relationships such as those for securities transactions or funds transfers.

Systems and controls for monitoring customer transactions for unusual or suspicious activity.