Wolfsberg: Building and Maintaining a Correspondent Banking Risk Based Approach (CBDDQ)

9th April 2018, Bachir El Nakib, Senior Consultant Compliance Alert (LLC)

The Wolfsberg Group has published an updated version of its Correspondent Banking Due Diligence Questionnaire (dated February 22, 2018). The CBDDQ has been enhanced and expanded in line with regulatory expectations on strengthening and building due diligence tools. The Group has also published guidance on completing the CBDDQ, frequently asked questions and a glossary. The CBDDQ is intended to provide a standardized document for use by those needing to conduct due diligence on correspondent banks. Over time, it is hoped that use and availability of the CBDDQ may, among other things, help prevent unnecessary de-risking.
The Wolfsberg Group was established in 2002 and comprises thirteen banks. Its objective is to develop frameworks and guidance for the management of financial crime risks. The CBDDQ is intended to support the work on de-risking in correspondent banking by the Financial Stability Board, the Financial Action Task Force and the Committee on Payments and Market Infrastructures.

Correspondent banking is the cornerstone of the global payment system, designed to serve the settlement of financial transactions across country borders. It allows companies and individuals to safely move money around the world and supports and encourages global trade. Observers from the IMF to the Financial Action Task Force have said large, international banks have been cutting correspondent banking relations with a number of financial companies in Africa, even when they have not demonstrated weakness, simply because they operate in countries deemed risky.

Regulations intended to make the correspondent banking network safer have stifled the ability to operate, say bankers. Correspondent banking relationships are in decline. Between 2009 and 2016 they fell by 25%, according to research published earlier this year by compliance software company Accuity. That fall was all the more striking considering that the number of global bank locations increased by 20%. Global firms want to work with local banks, but they fear the hefty cost of regulatory compliance. In 2014 alone, banks paid out $10 billion in fines relating to Anti Money-Laundering (AML) regulation, according to the US Department of Treasury. The update of the Wolfsberg questionnaire on due diligence has been expanded to take into account changes in expectations in correspondent banking. The Wolfsberg group, comprising 13 of the world’s biggest banks – including Bank of America, Credit Suisse and Société Générale – announced it was to release an updated versions of its due-diligence questionnaire (CBDDQ).

The new version will require more work from the providers and the respondents, the added questions will raise standards, but ultimately mean more work. There are ways to help by centralizing and streamlining. 

The Basel Committee on Banking Supervision (BCBS), the Committee on Payments and Market Infrastructures (CPMI), the Financial Action Task Force (FATF) and the Financial Stability Board (FSB) welcome the Correspondent Banking Due Diligence Questionnaire recently published by the Wolfsberg Group, as one of the industry initiatives that will help to address the decline in the number of correspondent banking relationships by facilitating due diligence processes.

The questionnaire aims to standardise the collection of information that correspondent banks ask from other banks when opening and maintaining these relationships, such as their ownership, the products and services they offer and their programmes for Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) as well as compliance with sanction regimes and Anti-Bribery and Corruption (ABC) programmes. The questionnaire is also part of a cooperative effort by the public and private sectors to recognise Know-Your-Customer (KYC) utilities as an effective and efficient tool to support due diligence processes. 

View the updated CBDDQ (version 1.2).

View the completion guidance.

View the FAQs.

View the Glossary.



Download File