Mastering U.S. Correspondent Banking: A Strategic Guide for Latin American Banks

Regulatory Compliance

October 5, 2026

Mastering U.S. Correspondent Banking: A Strategic Guide for Latin American Banks

Comprehensive Strategies for Establishing Compliant and Effective Relationships with U.S. Financial Institutions

By Patricia Marinho, Chief Compliance Officer at Aspire Digital Fund
Emanuel Batista, Managing Director, Investigations, Diligence and Compliance at Kroll

 

Causes of Correspondent Banking Relationship Failure

Correspondent banking relationships are essential for Latin American banks seeking to expand services and operations in the U.S. Establishing compliant correspondent banking relationships is challenging because of the stringent U.S. regulatory environment. This article offers guidance for Latin American banks preparing to establish successful correspondent banking relationships in the U.S.

Although regulatory expectations are well documented, many correspondent banking relationships fail because of execution gaps rather than intent. U.S. correspondent banks often decline or exit relationships when risk assessments are incomplete, anti-money laundering (AML) documentation is insufficient or management cannot clearly explain control implementation. Recognizing these failure points is essential before engaging with U.S. institutions.

AML/BSA Regulatory Expectations

Establishing a correspondent banking relationship in the U.S. requires adherence to AML and Bank Secrecy Act (BSA) regulations. U.S. regulators impose stringent standards and emphasize several key areas.

Risk Assessment

Conduct an AML and sanctions risk assessment to identify and evaluate risk across the bank’s customer base, products and services, transaction activity, and geographic exposure. The risk assessment should be refreshed at least annually and updated whenever there is a material change in the bank’s business or risk profile (e.g., entry into a new jurisdiction, launch of a new product, or a significant change in customer base or transaction activity).

Regulators and U.S. correspondent banks expect risk assessments for U.S. correspondent banking to explicitly address U.S. nexus exposure, including sanctions risk, cross-border transactions, nested account activity and higher-risk products (e.g., trade finance or payments involving multiple jurisdictions). Risk assessments should demonstrate how identified risks are mitigated through specific controls, not general descriptions.

Customer Due Diligence

Implement stringent customer due diligence (CDD) procedures to verify customer identities and assess banking activities by collecting and analyzing information to confirm customers are not involved in illicit activities. CDD is essential to an effective AML program because it allows banks to understand their customers and the nature of their relationships. Institutions should ensure customer risk ratings are applied consistently and supported by documented methods.

Transaction Monitoring

Implement a comprehensive transaction monitoring system to detect and report suspicious activities. The system should identify and flag unusual or potentially illegal transactions for further investigation. Advanced transaction monitoring systems allow banks to detect evolving money laundering methods and comply with regulatory requirements.

During regulatory reviews and correspondent bank due diligence, correspondent banks and regulators increasingly expect institutions to demonstrate that alerts are generated, that monitoring scenarios are aligned with risk and are periodically reviewed, and that clear governance is established. Documented model tuning, alert disposition rationales and audit trails are essential to demonstrate the effectiveness of transaction monitoring frameworks during reviews.

Implementing Best Practices in AML Program Development

Latin American banks must enhance their AML programs to meet U.S. regulatory standards. Best practices include:

A Risk-based Approach

Adjust your AML program based on risks identified in the risk assessment. Allocate resources and implement controls according to the risk levels of customer segments and transaction types, ensuring that risk classifications and controls are consistently applied and documented across business lines.

Continuous Training and Education

Ensure staff receive regular training and remain current on AML regulations and best practices. Ongoing training enables employees to identify and address potential red flags, ensuring a vigilant workforce that can mitigate AML risks.

Technology

Use advanced technology to strengthen AML programs. Automated systems increase the efficiency of transaction monitoring and reporting. Integrating advanced technology improves banks’ ability to detect and prevent financial crimes and ensures processes are traceable, auditable and supported by appropriate governance.

Periodic Reviews and Audits

Regularly review and audit your AML program to identify and address weaknesses. Continuous improvement is essential to maintaining an effective and compliant AML framework, and it demonstrates that deficiencies are promptly identified, tracked and remediated.

Common AML Pitfalls That Undermine Correspondent Banking Readiness

Despite significant investment in AML frameworks, many institutions face challenges in correspondent bank due diligence and regulatory reviews, primarily because of recurring execution gaps rather than deficiencies in underlying policies. U.S. correspondent banks and regulators emphasize the practical operation of AML programs, with a focus on governance, consistency and management oversight. The following pitfalls often undermine an institution’s readiness and can delay or prevent the establishment of correspondent banking relationships if not addressed proactively, or may result in relationship rejection or termination:

  • Outdated or incomplete risk assessments that do not reflect current products, geographies or customer activity.
  • Transaction monitoring systems that lack documented governance or validation or evidence of periodic review and tuning.
  • Overreliance on manual controls for high-volume transactions.
  • Inconsistent customer risk rating methods among business lines.
  • No evidence of effective escalation or decision-making processes.

Regulatory Approval Preparation

Regulatory approval of an AML program is required to establish correspondent banking relationships in the U.S. The following steps support preparation:

Develop a Comprehensive AML Policy

Establish an AML policy that articulates the bank’s commitment to compliance and describes the measures implemented to prevent money laundering and terrorist financing. The policy should demonstrate the bank’s dedication to regulatory compliance and financial integrity, supported by evidence that controls are effectively implemented.

Document the Processes

Maintain thorough records of AML procedures, including risk assessments, CDD and transaction monitoring. Proper documentation supports regulatory reviews and allows regulators to efficiently assess a bank’s AML program compliance.

Engage with Regulators

Maintain transparent communication with U.S. regulators. Seek guidance and feedback to ensure the AML program aligns with regulatory expectations. Proactive engagement clarifies requirements, fosters trust with supervisory authorities, and demonstrates a culture of transparency and accountability.

Use Checklists and Templates

Employ checklists and templates to organize and communicate the AML program. These tools help ensure all necessary elements are included, regulatory requirements are met and AML program components are thoroughly documented.

Prepare for Regulatory Review

Be ready to respond to regulators’ questions and promptly provide additional information during regulatory reviews. Show thorough understanding of the AML program and its implementation to instill confidence in compliance efforts and demonstrate clear ownership by management and compliance. Thorough preparation for regulatory inquiries increases a bank’s credibility and reaffirms its commitment to compliance.

Institutions should approach regulatory engagement with a proactive readiness mindset, rather than relying only on a compliance checklist. Regulators and correspondent banks emphasize that management must explain how AML controls function in practice, how issues are detected and resolved, and how the program adapts to changing risks. Demonstrating ownership and understanding is as important as providing supporting documentation.

Preparing to Engage with U.S. Correspondent Banks – Practical Requirements

In addition to establishing a robust AML framework, Latin American banks must be prepared to demonstrate their internal controls and compliance governance to potential U.S. correspondent institutions. A critical aspect of this process is ensuring the institution is audit ready. U.S. correspondent banks routinely require access to recent AML audits, as well as documentation demonstrating how policies and procedures function in practice and that identified issues have been effectively remediated.

 

Audit Readiness and Governance Transparency

Correspondent banks expect institutions to provide recent internal and external AML and BSA audit reports, as well as management responses and evidence of remediation. Demonstrating the process for tracking, escalating and closing audit findings reflects governance maturity and management ownership.

 

Compliance Team Structure and Accountability

A clearly defined compliance operating model is essential when engaging with U.S. correspondent banks. Institutions must demonstrate dedicated personnel and clear accountability throughout the AML lifecycle, including responsibility for:

  • Customer onboarding and due diligence
  • Transaction monitoring
  • Investigations and escalation
  • Filing suspicious activity reports
  • Oversight by a qualified Chief Compliance Officer (CCO)

U.S. correspondent banks assess whether compliance governance incorporates a risk and controls function and operates with sufficient independence and authority. Robust internal reporting lines, with governance professionals having direct access to senior management and the board, substantially enhance credibility during due diligence reviews.

Country Risk and Sanctions Exposure

Geographic exposure is a primary concern for U.S. correspondent banks. Institutions must clearly identify the jurisdictions where they operate or provide services, especially if they serve clients from high-risk or sanctioned countries or jurisdictions under heightened regulatory scrutiny. Onboarding processes should include explicit screening to prevent relationships with individuals or entities subject to Office of Foreign Assets Control (OFAC), EU or United Nations sanctions and to ensure ongoing screening throughout the customer lifecycle.

U.S. correspondent banks will assess whether institutions serve clients involved in activities that are legal locally but restricted or prohibited under U.S. law. Demonstrating a documented client risk classification method, together with enhanced due diligence and heightened monitoring for higher-risk relationships, is an expected baseline, and failure to appropriately identify and manage such exposures may result in onboarding rejection or relationship termination.

 

Technology, Documentation and Transparency

During onboarding and periodic reviews, U.S. correspondent banks typically ask the following:

  • Who is your core banking system provider?
  • Is your transaction monitoring system automated and regularly tested?
  • How do you collect, store and manage know-your-customer documentation?
  • Are AML processes digitized, traceable and verifiable?

Institutions should expect to share enterprise-wide risk assessments, CDD policies, system documentation and records of governance meetings to demonstrate that controls are effectively implemented and maintained. Correspondent banks often request interviews with compliance leadership and review the qualifications and experience of the CCO and other key compliance personnel as part of their due diligence assessment.

Establishing Robust Internal Controls

Effective internal controls are vital to maintaining integrity and compliance in correspondent banking operations. Key components include:

Segregation of Duties

Segregate duties to minimize fraud risk and ensure accountability by separating core functions such as transaction processing, compliance monitoring and audit activities. This approach reduces errors and fraud by preventing any individual from controlling all aspects of a transaction.

Compliance Oversight

Establish a compliance team to oversee the AML program and ensure regulatory compliance. The team must have sufficient authority and resources to monitor and enforce compliance across the organization. Effective oversight is essential to maintaining the integrity and credibility of a bank’s AML program.

Internal Audits

Conduct regular audits to assess AML program effectiveness and identify areas for improvement. These audits independently review compliance processes and confirm that AML controls are functioning as intended. Regular audits are essential for detecting vulnerabilities and maintaining the effectiveness of the bank’s AML program.

Whistleblower Mechanisms

Establish confidential channels that allow employees to report suspicious activities or potential AML policy violations without fear of retaliation. These mechanisms facilitate early identification and resolution of compliance issues. They strengthen a bank’s capacity to prevent financial crimes by offering a secure, confidential reporting channel for employees.

Establishing a Compliance Culture

A strong compliance culture is essential to sustaining correspondent banking relationships. To promote this culture within your organization, consider the following strategies:

Leadership Commitment

Senior leadership must demonstrate full commitment to compliance by exemplifying integrity and ethical conduct. A strong tone at the top is essential for cultivating a culture of compliance and making it a priority across the organization.

Employee Engagement

Involve employees at all levels in compliance initiatives. Promote open communication and empower employees to help develop the AML program. Strong employee engagement builds a culture of compliance and embeds compliance into daily operations.

Incentives for Compliance

Implement incentive and recognition programs to acknowledge employee contributions. Recognizing compliance efforts underscores their importance and motivates employees to follow AML policies. These programs foster a compliance-focused culture and encourage engagement in related initiatives.

Continuous Improvement

Regularly review and update the AML program to address emerging risks and evolving regulations. Gather employee feedback and suggestions to improve compliance processes. Continuous improvement is essential to maintaining the effectiveness and relevance of a bank’s AML program amid changing regulations.

Engagement of External Expertise

Alongside robust internal controls and a compliance-focused culture, Latin American banks benefit from external expertise to strengthen AML programs. External expertise is most effective when it challenges assumptions, independently validates controls and enhances regulatory readiness without replacing internal ownership of the AML program.

Consulting Services

Engage firms specializing in AML compliance guidance and support. Consultants assess AML programs, identify gaps and recommend strategies for improvement. These services strengthen a bank’s AML program and support regulatory compliance.

Technology Providers

Collaborate with technology providers offering advanced AML solutions, including transaction monitoring systems, data analytics tools and compliance software. These solutions automate and streamline AML processes, enhancing efficiency and effectiveness. Advanced technology increases a bank’s ability to detect and prevent financial crimes while ensuring regulatory compliance.

Compliance Counsel

Engage legal or regulatory advisors with expertise in AML, BSA and sanctions requirements to ensure the AML program complies with applicable supervisory and U.S. correspondent banking standards.

Industry Associations

Join industry associations and participate in forums to remain informed of current AML trends and best practices. These associations and forums provide valuable resources, networking opportunities and advocacy for AML compliance. Active participation enables banks to stay current with regulatory developments and exchange best practices with peers.

Conclusion

Establishing and maintaining U.S. correspondent banking relationships requires more than technical compliance; it demands readiness, transparency and effective risk ownership. Latin American banks that invest in robust AML programs, strong internal controls and a compliance-driven culture position themselves as credible long-term partners for U.S. institutions. By emphasizing execution, ongoing improvement and proactive engagement, banks can meet regulatory expectations and sustain correspondent relationships in a risk-sensitive environment.

 

Originally published on acams.org, a publication of ACAMS © 2026

 

References


Federal Financial Institutions Examination Council. (n.d.). Bank Secrecy Act/Anti-Money Laundering Examination Manual. Retrieved March 2026 from https://bsaaml.ffiec.gov/manual. U.S. Department of the Treasury, Financial Crimes Enforcement Network, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, & National Credit Union Administration. (August 30, 2016). “Joint Fact Sheet on Foreign Correspondent Banking: Approach to BSA/AML and OFAC Sanctions Supervision and Enforcement.” Retrieved March 2026 from https://home.treasury.gov/system/files/136/archive-documents/Foreign-Correspondent-Banking-Fact-Sheet.pdf. Financial Action Task Force. (October 2016). FATF Guidance: Correspondent Banking Services. Retrieved March 2026 from https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Correspondent-banking-services.html. Wolfsberg Group. (October 2022). Wolfsberg Group—Financial Crime Principles for Correspondent Banking. Retrieved March 2026 from https://wolfsberg-group.org/resources/correspondent-banking/91. Office of the Comptroller of the Currency. (n.d.). “Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) Examinations.” Retrieved March 2026 from https://www.occ.gov/topics/supervision-and-examination/bsa/bsa-aml-examinations/index-bsa-aml-examinations.html.

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