PART 3Finance

CHAPTER 2Other financial and investment restrictions

F1Correspondent banking relationships F2and processing payments17A

1

A UK credit or financial institution (“C”) (“the correspondent”) must not establish or continue a correspondent banking relationship with the following (“the respondent”)—

a

a designated person (“D”),

b

a UK credit or financial institution, which is owned or controlled directly or indirectly (within the meaning of regulation 7) by D, or

c

a non-UK credit or financial institution, which is owned or controlled directly or indirectly (within the meaning of regulation 7) by D,

if C knows, or has reasonable cause to suspect, that the correspondent banking relationship is with a designated person.

2

C must not process a F3... payment to, from or via –

a

D,

b

a UK credit or financial institution, which is owned or controlled directly or indirectly (within the meaning of regulation 7) by D, or

c

a non-UK credit or financial institution, which is owned or controlled directly or indirectly (within the meaning of regulation 7) by D,

if C knows, or has reasonable cause to suspect, that the F3... payment is to, from or via such a person.

3

Paragraphs (1) and (2) are subject to Part 7 (Exceptions and licences).

4

A person who contravenes a prohibition in paragraph (1) or (2) commits an offence.

F45

For the purposes of this regulation, a reference to “processing” a payment—

a

includes the clearing and settlement of a payment; but

b

does not include the act of crediting a payment, for the first time, to C where that payment is credited to an account which is—

i

in the name of C; and

ii

not held on behalf of, or for the benefit of, a customer of C.

6

In this regulation—

  • “correspondent banking relationship” means the provision of banking services by a correspondent to a respondent including providing a current or other liability account and related services, such as cash management, international funds transfers, cheque clearing, providing customers of the respondent with direct access to accounts with the correspondent (and vice versa) and providing foreign exchange services;

  • “designated person” means a person who is designated under regulation 5 (power to designate persons) for the purposes of this regulation;

  • “non-UK credit or financial institution” means—

    1. a

      a person, other than an individual, which would satisfy the threshold conditions for permission under Part 4A of the Financial Services and Markets Act 2000 if it had its registered office (or if it does not have one, its head office) in the United Kingdom, or

    2. b

      an undertaking, other than a UK credit or financial institution, which by way of business—

      1. i

        operates a currency exchange office,

      2. ii

        transmits money (or any representation of monetary value) by any means, or

      3. iii

        cashes cheques that are made payable to customers;

  • “UK credit or financial institution” means—

    1. a

      a person that has permission under Part 4A of the Financial Services and Markets Act 2000 (permission to carry on regulated activities), or

    2. b

      an undertaking domiciled in the United Kingdom which by way of business—

      1. i

        operates a currency exchange office,

      2. ii

        transmits money (or any representation of monetary value) by any means, or

      3. iii

        cashes cheques that are made payable to customers.