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By Matthew LEANEY*
Correspondent banking represents one of the most vexing dilemmas for financial institutions and those who regulate them.
On the one hand, it has long been a key mechanism for integrating developing countries into the global financial system and giving them access to the capital they need. On the other hand, correspondent banking relationships are inherently risky for the global banks that grant access to the respondent bank's customers without being able to directly conduct Know Your Customer/Customer Due Diligence (KYC/CDD) checks on them.
It's not a small problem: make access too easy and you risk allowing billions of illicit funds through your door; cut off the relationships and you starve emerging...
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