Correspondent accounts for foreign "Shell" banks

(Sec. 313): The Act prohibits a “covered financial institution” from opening or maintaining a correspondent account in the U.S. for a foreign bank that does not have a physical presence in any country (a foreign shell bank). The term “covered financial institution” includes, among other institutions, insured and commercial banks, credit unions, and thrift institutions.

Furthermore, covered financial institutions must take reasonable steps to make sure that a correspondent account in the U.S. for a foreign bank is not being used indirectly for a foreign bank with no physical presence in any country.

Section 313 authorizes FinCEN to issue regulations that “delineate the reasonable steps necessary to comply with this paragraph.” FinCEN has done so and you can find the new rules at 31 CFR 1010.630. Because of similarities between this Section 313 and Section 319(b) (described in the next paragraphs), FinCEN issued a single set of regulations dealing with both of these statutory provisions. We describe them in the topics in this section.