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Bank Secrecy Act
Anti-Money Laundering
Examination Manual

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Embassy and Foreign Consulate Accounts—Overview

 

Objective. Assess the adequacy of the bank’s systems to manage the risks associated with transactions involving embassy and foreign consulate accounts, and management’s ability to implement effective due diligence, monitoring, and reporting systems.

Embassies contain the offices of the foreign ambassador, the diplomatic representative, and their staff. The embassy, led by the ambassador, is a foreign government’s official representation in the United States (or other country). Foreign consulate offices act as branches of the embassy and perform various administrative and governmental functions (e.g., issuing visas and handling immigration matters). Foreign consulate offices are typically located in major metropolitan areas. In addition, foreign ambassadors’ diplomatic representatives, their families, and their associates may be considered politically exposed persons (PEP) in certain circumstances.248

Embassies and foreign consulates in the United States require access to the banking system to meet many of their day-to-day financial responsibilities. Such services can range from account relationships for operational expenses (e.g., payroll, rent, and utilities) to inter- and intragovernmental transactions (e.g., commercial and military purchases). In addition to official embassy accounts, some banks provide ancillary services or accounts to embassy staff, families, and current or prior foreign government officials. Each of these relationships poses different levels of risk to the bank.

Embassy accounts, including those accounts for a specific embassy office such as a cultural or education ministry, a defense attaché or ministry, or any other account, should have a specific operating purpose stating the official function of the foreign government office. Consistent with established practices for business relationships, these embassy accounts should have written authorization by the foreign government.

Risk Factors

To provide embassy and foreign consulate services, a U.S. bank may need to maintain a foreign correspondent relationship with the embassy’s or foreign consulate’s bank. Banks conducting business with foreign embassies or consulates should assess and understand the potential risks of these accounts and should develop appropriate policies, procedures, and processes. Embassy or foreign consulate accounts may pose a higher risk in the following circumstances:

  • Accounts are from countries that have been designated as higher risk.
  • Substantial currency transactions take place in the accounts.
  • Account activity is not consistent with the purpose of the account (e.g., pouch activity or payable upon proper identification transactions).
  • Accounts directly fund personal expenses of foreign nationals, including but not limited to expenses for college students.
  • Official embassy business is conducted through personal accounts.

Risk Mitigation

Banks should obtain comprehensive due diligence information on embassy and foreign consulate account relationships. For private banking accounts for non-U.S. persons specifically, banks must obtain due diligence information as required by 31 CFR 103.178.249 The bank’s due diligence related to embassy and foreign consulate account relationships should be commensurate with the risk levels presented. In addition, banks are expected to establish policies, procedures, and processes that provide for greater scrutiny and monitoring of all embassy and foreign consulate account relationships. Management should fully understand the purpose of the account and the expected volume and nature of account activity. Ongoing monitoring of embassy and foreign consulate account relationships is critical to ensuring that the account relationships are being used as anticipated.

 

 

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