Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

Can a shell bank maintain a correspondent account with a US bank?

1. Yes, with proper documentation

2. Yes, if it is registered

3. No, that is prohibited

4. Yes, under certain conditions

The correct answer is: No, that is prohibited

The correct response highlights the regulatory environment surrounding shell banks and their relationships with correspondent accounts in the United States. A shell bank, by definition, is a bank that has no physical presence or significant bank operations in any jurisdiction. U.S. regulations have established strict parameters concerning the acceptance of correspondent accounts to mitigate risks associated with money laundering and the financing of terrorism. Specifically, the U.S. has prohibited domestic financial institutions from maintaining accounts for shell banks. This prohibition stems from the inherent risks associated with shell banks, which often lack transparency and accountability. By not having a physical presence, these banks can evade regulatory scrutiny, complicating the efforts to monitor their activities and ascertain the legitimacy of their transactions. The ban on correspondent accounts underscores the importance of banking institutions to know their customers — a key element of effective anti-money laundering practices. While there may be other regulatory measures or conditions that can apply in different contexts, the foundational rule is that U.S. banks cannot maintain correspondent accounts for shell banks. This regulatory stance is in line with global efforts to prevent illicit financial activities that could undermine the integrity of the international banking system.