Why a Process Agent is Required Under a Certification by a Foreign Bank

Overview: When a U.S. covered financial institution provides correspondent accounts to a foreign bank, the U.S. institution must comply with Bank Secrecy Act/USA PATRIOT Act requirements relating to foreign shell banks, ownership records, and agents for service of legal process. A foreign bank typically completes a Certification Regarding Correspondent Accounts for Foreign Banks to support the U.S. institution’s compliance with these requirements. The Certification identifies key information about the foreign bank, confirms that the foreign bank is not a foreign shell bank and is not indirectly providing banking services to a foreign shell bank, and identifies a U.S.-based agent authorized to accept service of legal process for records relating to the correspondent account.

USA PATRIOT Act Background

After September 11, 2001, Congress enacted the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, commonly known as the USA PATRIOT Act. The Act was signed into law on October 26, 2001, and was designed to strengthen law enforcement tools, deter and punish terrorist activity, and combat money laundering and terrorist financing.

Required Certification Regarding Correspondent Accounts for Foreign Banks

FinCEN regulations, currently reflected in 31 CFR 1010.630, prohibit covered financial institutions from establishing, maintaining, administering, or managing correspondent accounts in the United States for, or on behalf of, foreign shell banks. Covered financial institutions must also take reasonable steps to ensure that correspondent accounts for foreign banks are not being used to indirectly provide banking services to foreign shell banks.

Foreign banks completing the Certification generally provide:

• The name of the foreign bank;
• The correspondent account or accounts covered by the Certification;
• The physical address and country where the foreign bank is authorized to conduct banking activities;
• Confirmation that it does not use correspondent accounts to provide banking services to a foreign shell bank;
• Ownership information, including applicable record and beneficial ownership information;
• The name and U.S. street address of the agent authorized to accept service of legal process for records relating to the correspondent account; and
• An agreement to notify each covered financial institution of any material change in the facts reported in the Certification within 30 calendar days.

USA PATRIOT Act Requirement to Identify a US Process Agent

Because many foreign banks do not have a U.S. presence, they often appoint a professional process agent to satisfy the requirement to identify a person residing in the United States who is authorized and has agreed to accept service of legal process for records relating to the correspondent account. The process agent information is included in the Certification.

The role of the process agent is limited. The process agent receives service of legal process on behalf of the foreign bank from the Secretary of the Treasury or the Attorney General of the United States for records relating to the correspondent account and promptly forwards that service in accordance with the foreign bank’s instructions.

A professional process agent should:

• Maintain tight internal controls: The process agent should maintain accurate records of appointments, active clients, authorized contacts, and termination dates.
• Understand the limited scope of the role: The appointment is not a general agency appointment. It is limited to the service of legal process for records relating to the correspondent account.
• Respond and act quickly: Any service received may be time sensitive, and the process agent should have a strict protocol for prompt review, escalation, and delivery.
• Support recertification: Foreign banks must recertify at least once every three years. A professional process agent should be prepared to promptly confirm whether it continues to act in that capacity when contacted during the recertification process.

Failure to Comply Can Result in Closure of Correspondent Accounts

Non-compliance with the Certification, recertification, or interim verification requirements can result in closure of all correspondent accounts for the foreign bank. If a covered financial institution cannot obtain the required Certification or Recertification information, or cannot verify or correct information when required, the institution must close the correspondent accounts within the regulatory timelines and may not permit new positions or transactions except those necessary to close the account.

For this reason, appointing a professional process agent that understands the limited but important role, maintains reliable records, and can promptly verify an active appointment is an important compliance consideration for foreign banks maintaining correspondent accounts with U.S. covered financial institutions.

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.