3-1873.19
In light of recent actions involving
Riggs Bank N.A., the Office of the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision and the National
Credit Union Administration (“the agencies”) and the Financial Crimes
Enforcement Network have received inquiries as to whether financial
institutions should do business with embassies and establish account
services for foreign governments, foreign embassies and foreign political
figures. The purpose of this advisory is to provide guidance to institutions
on this subject.
- As it would with any new account, an institution
should evaluate whether or not to accept a new account for a foreign
government, embassy, or political figure. That decision should be
made by the institution’s management, under standards and guidelines
established by the board of directors, and should be based on the
institution’s own business objectives, its assessment of the risks
associated with particular accounts or lines of business, and its
capacity to manage those risks.
- The agencies will not, absent extraordinary circumstances,
direct or encourage any institution to open, close, or refuse a particular
account or relationship.
- Providing financial services to foreign governments
and embassies and to foreign political figures can, depending on the
nature of the customer and the services provided, involve varying
degrees of risk. Such services can range from account relationships
that enable an embassy to handle the payment of operational expenses,
e.g., payroll, rent, and utilities, to ancillary services or accounts
provided to embassy staff or foreign government officials, each potentially
posing different levels of risk. Institutions are expected to assess
the risks involved in any such relationships, and to take steps to
ensure both that such risks are appropriately managed and that the
institution can do so in full compliance with its obligations under
the Bank Secrecy Act, as amended by the USA Patriot Act, and the regulations
promulgated thereunder.
- Where an institution elects to establish financial
relationships with foreign governments, embassies, or political figures,
the agencies, consistent with their usual practice of risk-based supervision,
will make their own assessment of the risks involved in such business.
As is the case with all accounts, the institution should expect appropriate
scrutiny by examiners that is commensurate with the level of risk
presented by the account relationship. As in any case where higher
risks are presented, the institution should expect an increased level
of review by examiners to ensure that the institution has in place
controls and compliance-oversight systems adequate to monitor and
manage such risks, as well as personnel trained in the management
of such risks and in the requirements of applicable laws and regulations.
- Institutions that have or are considering taking
on relationships with foreign governments, embassies, or political
figures should ensure that such customers are aware of the requirements
of U.S. laws and regulations to which the institution is subject,
and should, to the maximum extent feasible, seek to structure such
relationships in order to conform them to conventional U.S. domestic
banking relationships so as to reduce the risks that might be presented
by such relationships.
- Any institutions that have questions about this guidance
are encouraged to contact their primary federal regulator.
Interagency guidance of June 15, 2004 (SR-04-10).
