Correspondent Banking

Correspondent banking is a relationship where one financial institution (the correspondent) provides services to another (the respondent), typically including wire transfers, foreign exchange, and trade finance. US correspondent banks are required to screen transactions for sanctions — and often impose this obligation contractually on the respondent banks and their downstream customers.

Sanctions implications

Because virtually all USD-denominated transactions pass through US correspondent banks, the jurisdictional reach of OFAC sanctions extends far beyond direct US person involvement. This is why most international banks maintain sanctions screening programs even if they have no direct US presence.