The Bankers Association for Finance and Trade (BAFT) has released an updated version of its guidelines to help respondents establish and maintain correspondent banking relationships necessary for letter of credit (L/C) amongst other international financial transactions and banking services for other financial institutions.

The BAFT Respondent's Playbook 2.0: A Correspondent Banking Relationship Guide is intended as a roadmap for respondent banks on international anti-money laundering and counter financing of terrorism (AML/CFT) standards.

Respondents and correspondents

This updated correspondent banking relationship guide provides actions that may improve the ability of respondent banks to obtain and maintain a correspondent banking relationship.

It is an update to BATF's 2019 guidance for users of correspondent banking services and outlines the decision-making process of correspondents establishing new and reviewing existing relationships and the measures that respondents may take to increase the likelihood of a favourable outcome.

Core working group

The new guidance has been crafted by a core working group consisting of 10 global correspondent banks and one industry body that provided advice on establishing and maintaining relationships, and explored options for respondents facing challenges in obtaining or keeping a relationship.

In the case of establishing a new relationship for instance, BAFT's research discovered that about two-thirds of surveyed correspondent banks consider three major commercial factors when assessing a potential partnership: potential profitability, expected service delivery costs and respondent creditworthiness. The guide accordingly advises on these factors.

Other sections

The 2023 version incorporates current regulatory changes in the marketplace and includes a new section on the ISO 20022 migration and sections covering the current state of correspondent banking.

The report also contemplates options for respondent banks unable to obtain or maintain a relationship and special considerations for money services businesses and fintechs

Links for BAFT members to download or non-members to purchase the Respondent's Playbook 2.0: A Correspondent Banking Relationship Guide can be found here.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.