Correspondent Banking

A relationship where one bank provides services to another, including payment processing. US correspondent banks must screen for sanctions, and often pass this obligation to their clients.

TL;DR

TL;DR: Correspondent banking is an arrangement where one bank provides services, including payment processing, to another. US correspondent banks must screen for sanctions and often pass those obligations to their client banks.

How correspondent banking works

A correspondent bank holds accounts for, and processes transactions on behalf of, a respondent bank, often one in another country. This lets the respondent's customers send and receive payments in a currency or region where the respondent has no direct presence. The correspondent is the gateway through which those funds flow.

Why sanctions screening concentrates here

Because correspondent banks sit on the cross-border path, they are a natural choke point for sanctions enforcement. A US correspondent must screen transactions and counterparties for listed parties and block any that hit. If it misses one, it faces OFAC liability, with strict liability and penalties starting at $356,000 per violation.

The cascade to clients

To protect themselves, correspondent banks push screening and due diligence requirements down to their respondent clients, who in turn push them to their own customers. The result is a chain where screening obligations cascade outward from the correspondent, and a failure anywhere in the chain can sever the relationship.

The agent payment angle

When an AI agent routes a payment through a bank, it inherits the screening expectations that cascade from the correspondent layer. Screening the counterparty before the payment leaves, as sanctionsai.dev does with a single under-100-ms call against 19,218 SDN names, keeps the agent from becoming the weak link in that chain.