CORRESPONDENT ACCOUNT KYC TOOLKIT: A GUIDE TO COMMON DOCUMENTATION REQUIREMENTS
The International Finance Corporation (IFC), the private sector arm of the World Bank Group, launched theGlobal Trade Finance Program (GTFP) in 2005. Under this program, IFC guarantees the payment risk of counter-party banks in emerging markets related to a variety of underlying trade instruments. The GTFP alsoprovides technical assistance to banks, with a focus on institutional capacity building in the broad areas of Trade Finance and International Trade Operations. For more information about the GTFP, please visit:
Trade is a fundamental component in a country’s growth and development and this has been
especially truefor emerging markets. The IFC with its mandate to support the private sector within developing countriesactively works to facilitate cross-border trade through its trade finance program. Under the GTFP, IFC canprovide guarantees covering up to 100% of a transaction value thus facilitating the parties involved with thetrade transaction to close the deal despite challenges they may have encountered with credit limits, country exposure constraints, etc. The underlying framework between these financial institutions is normally acorrespondent banking relationship
, or, at a minimum, the completion of a “Know Your Customer”(“KYC”) compliance file which needs to be in place for the documentary credit or other trade instrument to
be issued, confirmed or negotiated. From its work in developing economies, IFC has found that many banks encounter difficulties in establishing correspondent banking relationships. Some of the difficulties involve inadequate or poor information being provided by the Applicant Bank to support the application to the potential correspondent. The guidelinespresented herein, which draw upon the results of research undertaken with local, regional and internationalbanks participating in the GTFP, are designed to inform banks of international best practice standards withregard to the information needed to support an application for a correspondent banking relationship or torespond to a request from a bank related to its internal KYC compliance procedures. By improving thecontent and delivery of such information, an Applicant Bank presents itself in a professional manner and may reduce the time taken for the application to be processed.
Correspondent Banking is the provision of a current or other liability account and/or related services toanother financial institution used to meet its cash clearing, liquidity management and short-term borrowing orinvestment needs, which includes trade related documentary credits. The Correspondent Bank provides theseservices to the Applicant Bank.