Correspondent relationship — the five extra duties
Correspondent banking is the one relationship type where EU AML law names the measures rather than leaving them to the risk-based approach. Article 36 of Regulation (EU) 2024/1624 sets out five specific duties for cross-border correspondent relationships with a third-country respondent institution, on top of ordinary customer due diligence — and Article 39 adds an outright prohibition that has no risk-based exception at all.
1. The five measures
They apply to cross-border correspondent relationships — including relationships established for securities transactions or fund transfers — involving the execution of payments with a third-country respondent institution. Credit institutions and financial institutions must, when entering into the relationship:
| # | Measure |
|---|---|
| (a) | Gather sufficient information to understand fully the nature of the respondent’s business, and determine from publicly available information the institution’s reputation and the quality of its supervision |
| (b) | Assess the respondent institution’s AML/CFT controls |
| (c) | Obtain senior management approval before establishing new correspondent relationships |
| (d) | Document the respective responsibilities of each institution |
| (e) | For payable-through accounts, be satisfied that the respondent has verified the identity of, and performs ongoing due diligence on, the customers with direct access to those accounts |
Measure (a) has two halves that are easy to collapse into one. Understanding the business is a due-diligence exercise on the respondent. Determining reputation and supervisory quality from publicly available information is a separate, sourced assessment — and it is the half that tends to be missing from files.
2. Payable-through accounts
A payable-through account is a correspondent account whose features let the respondent’s own customers transact directly. That is why measure (e) reaches through the respondent to its customers: the correspondent must be satisfied that the respondent has verified their identity and performs ongoing due diligence on them. In practice this is a contractual and assurance question — what the respondent has undertaken, and what evidence of it the correspondent receives and refreshes.
3. The crypto extension
Article 37 carries specific enhanced measures for cross-border correspondent relationships in the crypto-asset services context, and Article 39(2) extends the shell prohibition into it from the other direction: crypto-asset service providers must ensure their accounts are not used by shell institutions to provide crypto-asset services, and must have internal policies, procedures and controls in place to detect any attempt to use their accounts for the provision of unregulated crypto-asset services.
That last duty is a detection obligation, not a contractual one. A CASP whose only control is a prohibition in its terms of service has policies but no procedure, which is exactly the distinction the article draws.
Article 38 adds specific measures for individual third-country respondent institutions, which is the mechanism for targeted action short of the blanket Article 39 prohibition.
FAQ
Does this apply to relationships inside the EU?
Article 36 is framed around cross-border correspondent relationships involving a third-country respondent institution. Intra-EU relationships remain subject to ordinary customer due diligence and to whatever the risk assessment requires.
Is there any risk-based exception to the shell institution rule?
No. Article 39 prohibits entering into or continuing such a relationship, and requires appropriate measures against relationships with institutions known to allow their accounts to be used by shell institutions.
Who has to approve a new correspondent relationship?
Senior management, before the relationship is established — measure (c). The approval sits alongside the documentation of respective responsibilities, not instead of it.
Related: Enhanced due diligence · The MiCA travel rule · Payer and payee data on transfers
