When applying risk-based due diligence to correspondent banking customers, which indicator is considered important?

When applying risk-based due diligence to correspondent banking customers, it is essential to consider multiple indicators that can highlight potential risks associated with the client. Each indicator plays a vital role in providing a comprehensive understanding of the client's risk profile.

The client's domicile is important because it helps assess the jurisdiction's regulatory environment and the risk of money laundering or terrorist financing specific to that region. Some countries may have weaker AML/CFT frameworks, which could increase the risk for correspondent banks operating with clients in those areas.

The client's business model offers insight into the types of transactions conducted and the nature of the business. Understanding how a client operates can illuminate potential vulnerabilities to illicit activities, as certain business types may be more susceptible to risks than others. For instance, a client with a complex or opaque business model may present additional risks.

The client's ownership structure is crucial for identifying beneficial owners and understanding potential links to high-risk individuals or entities. Transparency in ownership helps mitigate risks associated with undisclosed or hidden ownership interests that could facilitate money laundering or other financial crimes.

Considering all of these indicators collectively enables banks to perform a thorough risk assessment and adopt appropriate due diligence measures tailored to the level of risk presented by each correspondent banking customer. Hence, the inclusive approach of evaluating the client's domicile, business