Which type of account is subject to special scrutiny under the Bank Secrecy Act?

Foreign correspondent accounts are subject to special scrutiny under the Bank Secrecy Act (BSA) due to the increased risks associated with these types of accounts. A foreign correspondent account allows a foreign bank to access and utilize the services of a domestic financial institution. Because these accounts can involve international transactions and may be used to facilitate cross-border money transfers, they are particularly susceptible to money laundering and other financial crimes.

The BSA aims to prevent and detect such activities by placing stringent reporting and record-keeping requirements on financial institutions. Foreign correspondent accounts are more closely monitored because they can be exploited by individuals or entities seeking to bypass controls in their home countries. Therefore, banks must conduct thorough due diligence and ongoing monitoring of these accounts to comply with the BSA and mitigate risks associated with them. This includes assessing the anti-money laundering controls of foreign institutions and understanding the nature and purpose of the accounts.