Entities Requiring Due Diligence When Correspondent Banking Client is Not Controlled by its Parent

AE

The two entities that require due diligence when the correspondent banking client is not controlled by its parent are:

C. The entities exhibiting higher risk characteristics: Correspondent banking relationships can pose significant risks to financial institutions, as they involve transactions on behalf of unknown third parties in foreign jurisdictions. As a result, financial institutions must conduct enhanced due diligence (EDD) on correspondent banking clients that exhibit higher risk characteristics. This may include, but is not limited to, clients located in high-risk jurisdictions, clients that operate in high-risk industries or clients that have poor regulatory compliance records.

E. The correspondent banking client itself: Financial institutions must conduct due diligence on their correspondent banking clients, regardless of whether the client is controlled by its parent or not. This includes obtaining and verifying information about the client's identity, ownership, control structure, and business activities. Financial institutions must also assess the correspondent banking client's level of risk and monitor the transactions that flow through the correspondent banking relationship to detect and report suspicious activity.

Therefore, the correct answer to this question is options C and E.