korrespondenttipankkitoiminta

Korrespondenttipankkitoiminta, often translated as correspondent banking, refers to a relationship between banks where one bank (the correspondent bank) provides services to another bank (the respondent bank). These services typically involve facilitating cross-border transactions, holding accounts in foreign currencies, and processing payments on behalf of the respondent bank.

The core function of correspondent banking is to enable financial institutions to operate globally without needing to establish a physical presence in every country. For example, a small bank in one country might not have the infrastructure or licenses to conduct international wire transfers. Through a correspondent banking relationship, it can leverage the network and expertise of a larger bank in another country to offer these services to its own customers. This includes handling foreign exchange, clearing checks, and settling transactions in different currencies.

Correspondent banking plays a crucial role in the global financial system by connecting disparate banking networks and facilitating international trade and investment. However, it also presents risks, particularly concerning money laundering and terrorist financing. Regulators pay close attention to these relationships, requiring banks to conduct thorough due diligence on their correspondent banking partners to ensure compliance with anti-money laundering (AML) and know your customer (KYC) regulations. The complexity and potential risks involved have led to increased scrutiny and a trend towards more consolidated correspondent banking relationships.