Article 38 AMLR – Specific measures for individual third-country respondent institutions

1.   Credit institutions and financial institutions shall apply the measures laid down in paragraph 6 of this Article in relation to third-country respondent institutions with which they have a correspondent relationship pursuant to Articles 36 or 37 and in respect of which AMLA issues a recommendation pursuant to paragraph 2 of this Article.

2.   AMLA shall issue a recommendation addressed to credit institutions and financial institutions where there are concerns that respondent institutions in third countries fall into any of the following situations:

(a)	they are in serious, repeated or systematic breach of AML/CFT requirements;

(b)	they have weaknesses in their internal policies, procedures and controls that are likely to result in serious, repeated or systematic breaches of AML/CFT requirements;

(c)	they have in place internal policies, procedures and controls that are not commensurate with the risks of money laundering, its predicate offences and terrorist financing to which the third-country respondent institution is exposed.

3.   The recommendation referred to in paragraph 2 shall be issued where all of the following conditions are met:

(a)

on the basis of the information available in the context of its supervisory activities, a financial supervisor, including AMLA when performing its supervisory activities, deems that a third-country respondent institution falls into any of the situations listed in paragraph 2 and may affect the risk exposure of the correspondent relationship;

(b)

following an assessment of the information available to the financial supervisor referred to in point (a) of this paragraph, there is an agreement among financial supervisors in the Union that the third-country respondent institution falls into any of the situations listed in paragraph 2 and may affect the risk exposure of the correspondent relationship.

4.   Prior to issuing the recommendation referred to in paragraph 2, AMLA shall consult the third-country supervisor in charge of the respondent institution and request that it provides its own as well as the respondent institution’s views on the adequacy of AML/CFT policies, procedures and controls as well as of the customer due diligence measures the respondent institution has in place to mitigate risks of money laundering, its predicate offences and terrorist financing and remedial measures to be put in place. Where no reply is provided within 2 months or where the reply provided does not indicate that the third-country respondent institution can implement satisfactory AML/CFT policies, procedures and controls as well as apply adequate customer due diligence measures to mitigate the risks to which it is exposed that may affect the correspondent relationship, AMLA shall proceed with the recommendation.

5.   AMLA shall withdraw the recommendation referred to in paragraph 2 as soon as it considers that a third-country respondent institution on which it adopted that recommendation no longer fulfils the conditions laid down in paragraph 3.

6.   In relation to third-country respondent institutions referred to in paragraph 1, credit institutions and financial institutions shall:

(a)

abstain from entering into new business relationships with the third-country respondent institution unless they conclude, on the basis of the information collected under Article 36 or 37, that the mitigating measures applied to the business relationship with the third-country respondent institution and the measures in place in the third-country respondent institution can adequately mitigate the money laundering and terrorist financing risks associated with that business relationship;

(b)

for ongoing business relationships with the third-country respondent institution:(i)review and update the information on the respondent institution pursuant to Articles 36 or 37;(ii)terminate the business relationship unless they conclude, on the basis of the information collected under point (i), that the mitigating measures applied to the business relationship with the third-country respondent institution and the measures in place in the third-country respondent institution can adequately mitigate the money laundering and terrorist financing risks associated with that business relationship;

(c)	inform the respondent institution of the conclusions they have drawn in relation to the risks posed by the correspondent relationship following the recommendation by AMLA and the measures taken pursuant to points (a) or (b).

Where AMLA has withdrawn a recommendation pursuant to paragraph 5, credit institutions and financial institutions shall review their assessment as to whether the third-country respondent institutions fulfil any of the conditions laid down in paragraph 3.

7.   Credit institutions and financial institutions shall document any decision taken pursuant to this Article.