Correspondent banking
Updated
Summary
Correspondent banking is how a bank serves customers in a currency or country where it has no branch: it holds an account at another bank (a nostro account from its side, a vostro from the other's) and pays through it. A chain of such accounts carries most cross-border bank payments. For US dollars, the chain usually ends at a US bank, which is why US anti-money-laundering and sanctions rules reach foreign banks: a foreign bank's US correspondent account is both its access to the dollar and the point where US law can ask for its records or shut the door. US law lets Treasury or the Attorney General subpoena a foreign bank's records through that account and, if it does not comply, require US banks to close the account within 10 business days. The network has been shrinking for a decade: BIS data show about 25% fewer active correspondent relationships from 2011 to 2020. This theme covers that access lever, the de-risking trend, the standards bodies that set its rules, and the rival rails that try to route around it.
Key numbers
Active correspondent relationships, 2011-2019 (BIS): about -22% (2019 alone: about -3%) (as of 2019-12-31). Source: bis.org
Active correspondent relationships, 2011-2020 (BIS): about -25% (2020: -4%; value +7%) (as of 2020-12-31). Source: bis.org
Active USD correspondents, 2011-22: Americas ex-NA / Europe / N. America (CPMI): -49.9% / -41.4% / -19.1% (as of 2022-12-31). Source: bis.org
US dollar share of correspondent transfer value (CPMI, SWIFT data): 50.9% (euro 27.3%) (as of 2022-12-31). Source: bis.org
5318(k): time for US bank to close account after notice; penalty: 10 business days; up to $25,000 a day (as of 2023-07-31). Source: bsaaml.ffiec.gov
Banque Misr UAE: suspected Iranian front companies / flows, Jan 2024-Jun 2026 (FinCEN): 103 / about $1.8 billion (as of 2026-08-28). Source: public-inspection.federalregister.gov
MBaer Merchant Bank: illicit transactions since 2019 (FinCEN): at least $100 million (as of 2026-02-26). Source: public-inspection.federalregister.gov
Global average remittance cost, USD 200 / USD 500 (FSB): 6.5% / 4.3% (as of 2025-10-09). Source: fsb.org
Wholesale cross-border payments credited within one hour (FSB): more than 50% (as of 2025-10-09). Source: fsb.org
ISO 20022 adoption after end of MT coexistence (Swift): 97% (as of 2025-11-25). Source: swift.com
FATF R.16 threshold / deadline: USD/EUR 1,000; end-2030 (as of 2025-06-18). Source: fatf-gafi.org
Cross-border RMB payments 2024 (Shanghai government, CIPS): 175 trillion yuan, +43% (as of 2025-01-08). Source: english.shanghai.gov.cn
Timeline
2026-10-15 — Treasury designates Iraq's International Development Bank, saying it gave Iran US dollar access, and two Iranian offshore banks. (Source: home.treasury.gov)
2026-09-16 — FinCEN holds a FinCEN Exchange with global banks on Iranian networks using US correspondent relationships. (Source: fincen.gov)
2026-09-14 — OFAC designates Russia's VTB for correspondent relationships with sanctioned Iranian banks. (Source: home.treasury.gov)
2026-09-04 — OFAC designates Türkiye's Golden Global Bank for offering correspondent banking to Iranian banks. (Source: content.govdelivery.com)
2026-08-28 — FinCEN signs a section 311 proposal to bar US correspondent accounts for Banque Misr UAE (about $1.8 billion of suspect flows). (Source: public-inspection.federalregister.gov)
2026-08-24 — Treasury launches Operation Economic Outcast and warns foreign banks their US correspondent accounts are at risk. (Source: content.govdelivery.com)
2026-07-09 — Swift says its blockchain ledger is ready for 17 banks to pilot tokenised-deposit cross-border payments. (Source: swift.com)
2026-06-19 — FATF keeps Iran on its call-for-action list, subject to countermeasures. (Source: finma.ch)
2026-03-02 — FinCEN proposes a section 311 correspondent-account ban on Zurich's MBaer Merchant Bank. (Source: public-inspection.federalregister.gov)
2025-11-22 — Swift ends MT/ISO 20022 coexistence for cross-border payment instructions. (Source: swift.com)
2025-10-20 — FinCEN's section 2313a transmittal bans on CIBanco, Intercam and Vector take effect. (Source: fincen.gov)
2025-10-09 — FSB says G20 cross-border payments targets for 2027 are unlikely to be met. (Source: fsb.org)
2025-06-25 — FinCEN issues first section 2313a orders, against three Mexican financial institutions. (Source: fincen.gov)
2025-06-18 — FATF revises Recommendation 16: payer and payee data travel with cross-border payments over USD/EUR 1,000. (Source: fatf-gafi.org)
Key actors and links
U.S. Treasury (actor:us-treasury): Uses US correspondent accounts as the lever in the 2026 Iran campaign: designations, section 311 proposals and FinCEN tools.
Iran (country:iran): Main 2026 target: Treasury says Iran's shadow banks use US dollar correspondent relationships.
Sanctions exposure (indicator:sanctions-exposure): A bank's correspondent access is what sanctions exposure puts at risk.
Sanctions/enforcement (indicator:energy-sanctions-enforcement): Oil-revenue enforcement reaches banks through their correspondent accounts.
United Arab Emirates (country:united-arab-emirates): Banque Misr UAE faces a proposed US correspondent-account ban (FinCEN, August 2026).
Russia (country:russia): VTB designated in September 2026 for correspondent links to sanctioned Iranian banks.
Greece (country:greece): AA's 2026-10-22 news draft reports a first FinCEN 5318(k) subpoena to an unnamed Greek bank; not verified in this pass.
Dollar funding / liquidity conditions (market:dollar-funding): Correspondent accounts are how non-US banks reach dollar liquidity; losing one cuts that access.
SWIFT (actor:swift): The messaging network for correspondent payments; ended MT/ISO 20022 coexistence in November 2025.
BIS (actor:bis): Hosts CPMI, whose data show about 25% fewer active correspondent relationships from 2011 to 2020.
Cross-border payment infrastructure (theme:cross-border-payment-infrastructure): Correspondent banking is the incumbent layer that G20 targets aim to make cheaper and faster.
Tokenized deposits (theme:tokenized-deposits): Swift's ledger and Project Agorá test tokenised deposits as a faster correspondent layer.
mBridge (actor:mbridge): Multi-CBDC platform the BIS handed to its central-bank partners in October 2024; a non-correspondent route.
People’s Bank of China (actor:peoples-bank-of-china): China's CIPS reported 175 trillion yuan of cross-border RMB payments in 2024.
Stablecoins (theme:stablecoins): Inference (AA): a possible rail around bank correspondent chains, still tied to US rules when dollar-backed.
Why it matters now
Since August 2026 the correspondent account has been the main financial target of the US campaign against Iran. Treasury launched Operation Economic Outcast on 2026-08-24 and warned that foreign banks that knowingly help designated persons can lose or have strict limits put on their US correspondent accounts. It then designated Türkiye's Golden Global Bank (2026-09-04) for offering correspondent services to Iranian banks, Russia's VTB (2026-09-14) for a rial-ruble correspondent settlement system, and Iraq's International Development Bank (2026-10-15), which it says gave Iran dollar access. FinCEN held a FinCEN Exchange on 2026-09-16 on networks that use US correspondent relationships, and proposed cutting Banque Misr UAE off from US correspondent accounts after finding about $1.8 billion of flows from 103 suspected Iranian front companies. Earlier in 2026 FinCEN made similar section 311 proposals against Switzerland's MBaer and Cambodia's Huione successor, and its 2025 fentanyl orders against three Mexican firms showed the newer section 2313a/9714 tool. AA's own 2026-10-22 news draft reports that on 2026-10-21 FinCEN used its 5318(k) foreign-bank subpoena power for the first time, against an unnamed Greek bank; this pass could not open that release, so the claim is unverified here.
The plumbing is changing at the same time. Swift ended MT/ISO 20022 coexistence for cross-border payment instructions on 2025-11-22, with 97% adoption after cutover, and in July 2026 said its blockchain ledger was ready for 17 banks to pilot tokenised-deposit payments. FATF's revised Recommendation 16 will make name, address and date of birth travel with cross-border payments over USD/EUR 1,000 by end-2030. The FSB said in October 2025 that the G20's 2027 targets are unlikely to be met: remittances still cost 6.5% on average for USD 200. Outside the dollar system, CIPS reported 175 trillion yuan of cross-border RMB payments in 2024, up 43%, and mBridge has run without the BIS since October 2024.
Risks and open questions
Bull case: The case that the correspondent lever stays strong and the network adapts. The dollar remains dominant: CPMI data put it at 50.9% of correspondent transfer value at end-2022, so access to a US correspondent account still matters to almost every internationally active bank. US tools have widened: designations with correspondent-account warnings, section 311 special measure five (Banque Misr UAE, MBaer, Huione), section 2313a transmittal bans (Mexico, 2025) and the 5318(k) records subpoena. Treasury has used them at a fast pace since 2026-08-24. On the payments side, Swift's ISO 20022 cutover (97% adoption) and FATF's revised R.16 put richer data in each payment, which should make screening more accurate and could reduce blanket de-risking. Swift's ledger pilot and Project Agorá aim to give regulated banks faster rails inside the same rulebook. Inference (AA): if better data lets banks price risk client by client, de-risking can slow while enforcement stays targeted.
Bear case: The case that enforcement and compliance costs keep shrinking the network and push flows elsewhere. BIS data show relationships fell about 25% from 2011 to 2020 while payment value rose, so flows concentrated in fewer banks; USD correspondents in the Americas outside North America fell about half from 2011 to 2022. Treasury's own 2023 strategy names compliance cost and profitability as the main driver of de-risking, hitting remittance users and humanitarian groups. Every new correspondent-account action raises that cost. The FSB said in October 2025 the 2027 G20 targets are unlikely to be met, with remittances still at 6.5% for USD 200. Meanwhile rival rails grow: CIPS reported cross-border RMB payments up 43% in 2024, and mBridge has run without the BIS since 2024. Inference (AA): the more often the lever is pulled, the stronger the incentive for sanctioned and merely nervous banks to build or join routes the US cannot see, which would weaken the lever over time.
Falsifiers: - Strong-lever case fails if FinCEN's Banque Misr UAE and MBaer proposals are withdrawn or not finalised within a year of their comment periods. - Strong-lever case fails if a foreign bank successfully challenges a 5318(k) subpoena in a US court. - Strong-lever case fails if the CPMI's next data release shows the dollar's share of correspondent transfer value falling well below 50%. - Shrinking-network case fails if the next CPMI release shows active correspondent relationships stable or rising since 2022. - Shrinking-network case fails if the FSB's next KPI report shows remittance costs falling toward the G20 target and wholesale one-hour crediting rising sharply. - Alternative-rails inference fails if CIPS or mBridge volumes stall or if new participants stop joining despite US sanctions pressure. - The 'Greek bank' link fails if the FinCEN 21 October 2026 release, once read, does not describe a 5318(k) subpoena to a Greek bank.
Value accrual gate: Not a crypto asset. Correspondent access is a gate, not a store of value: it moves value toward the few large banks that still offer dollar clearing and away from smaller banks, remittance firms and their customers when relationships are cut. AA does not assume any token, stablecoin or alternative rail captures value from that shift.
What to watch
FinCEN final rule on Banque Misr UAE (section 311 correspondent-account ban); comment period ran about 30 days from 1 September 2026. (no scheduled date); Source: public-inspection.federalregister.gov
FinCEN final rule on MBaer Merchant Bank (section 311). (no scheduled date); Source: public-inspection.federalregister.gov
Whether FinCEN names the Greek bank, issues further 5318(k) subpoenas, or sends a termination notice (per AA news draft; unverified). (no scheduled date); speculative, no scheduled source
FATF October 2026 plenary: Iran's call-for-action status (FATF publishes lists three times a year; plenary date not confirmed here). (2026-10 (date not confirmed)); speculative, no scheduled source
Swift removes unstructured postal addresses from cross-border payment messages. (2026-11-14); Source: swift.com
First live tokenised-deposit transactions on Swift's ledger. (no scheduled date); Source: swift.com
Project Agorá lessons-learned report (phase expected to end in 1H 2026; no report seen). (no scheduled date); Source: bis.org
FSB 2026 cross-border payments progress and KPI report to the G20 (2025 report came out 9 October 2025; 2026 edition not yet listed). (2026-Q4 (not confirmed)); speculative, no scheduled source
More Operation Economic Outcast bank designations with correspondent-account warnings. (no scheduled date); speculative, no scheduled source
FATF revised Recommendation 16 implementation deadline. (2030-12-31); Source: fatf-gafi.org
AA inference
Inference (AA): This node is the choke point between the US sanctions nodes (Treasury, sanctions exposure, energy-sanctions enforcement) and the payments nodes (Swift, cross-border infrastructure, tokenised deposits, stablecoins). The 2026 Iran campaign shows the mechanism plainly: US authorities do not need jurisdiction over a bank in Ankara, Baghdad or Abu Dhabi, only over the US account it uses for dollars. Each action raises the expected cost of serving high-risk clients for every bank that keeps such an account, which AA expects to deepen de-risking at the edges of the network, the same edges where BIS data already show the steepest declines. The same pressure is the demand case for rails outside US reach, such as CIPS and mBridge. AA does not assume those rails gain share. The theme weakens if FinCEN's proposals stall and enforcement fades. It strengthens if a 5318(k) termination notice or a final section 311 rule actually cuts a European or Gulf bank off from dollars.
Sources
BIS/CPMI commentary of 31 August 2020: the number of active correspondents fell about 22% over 2011-2019 and about 3% in 2019; active corridors fell about 12% over eight years; payment value grew about 5% and volume about 4% in the last year, pointing to more concentrated flows; declines ranged from 13% (Northern America) to 34% (Latin America), and from 23% in advanced economies to 41% in small island developing states. (Source: bis.org, accessed 2026-10-22)
BIS/CPMI, 13 December 2021: active correspondent relationships fell 4% in 2020 and about 25% from 2011 to 2020, while cross-border payment volume rose 2% and value 7% in 2020. (Source: bis.org, accessed 2026-10-22)
CPMI correspondent banking chartpack (data as of December 2022, SWIFT data): active correspondents fell 2011-22 in every region, from -19.4% in Northern America to -47.1% in the Americas excluding North America; active USD correspondents fell 49.9% in the Americas, 41.4% in Europe and 19.1% in Northern America; the US dollar was 50.9% of transfer value in December 2022 and the euro 27.3%. (Source: bis.org, accessed 2026-10-22)
The CPMI correspondent banking data page lists releases for end-2018, end-2019, end-2020 and end-2022 data; no later data release is listed. (Source: bis.org, accessed 2026-10-22)
FFIEC BSA/AML Examination Manual: under 31 U.S.C. 5318(k) and 31 CFR 1010.670 the Treasury Secretary or Attorney General may summon or subpoena a foreign bank that keeps a US correspondent account, including for records held abroad; if the foreign bank fails to comply or fails to prevail in a court challenge, the US bank must terminate the correspondent relationship within 10 business days of written notice, or face a civil penalty of up to $25,000 a day. (Source: bsaaml.ffiec.gov, accessed 2026-10-22)
FFIEC BSA/AML Examination Manual: US banks with foreign-bank correspondent accounts must keep US records of the foreign bank's owners and a US agent for service of process, obtain certification at least every three years, and close the accounts if certification is not obtained in time. (Source: bsaaml.ffiec.gov, accessed 2026-10-22)
FinCEN NPRM signed 28 August 2026 (FR Doc. 2026-17871, scheduled for publication 1 September 2026): proposes section 311 special measure five against Banque Misr UAE, barring covered US institutions from opening or maintaining correspondent accounts for it; FinCEN calls it a 'critical access node to the U.S. dollar (USD) for Iranian illicit finance', identifies 103 potential Iranian shadow-banking front companies transacting about $1.8 billion through it from January 2024 to June 2026, and says it has three direct US correspondent relationships. (Source: public-inspection.federalregister.gov, accessed 2026-10-22)
FinCEN NPRM published 2 March 2026 (FR Doc. 2026-04033): proposes section 311 special measure five against MBaer Merchant Bank AG of Zurich, citing at least $100 million in illicit transactions since 2019 linked to Venezuelan, Russian and Iranian actors; MBaer has one direct US correspondent relationship. (Source: public-inspection.federalregister.gov, accessed 2026-10-22)
FinCEN section 311 NPRM (undated text referring to events to 10 April 2026): would extend the existing correspondent-account prohibition on Cambodia's Huione Group to H-Pay Service PLC and any successor entity. (Source: fincen.gov, accessed 2026-10-22)
FinCEN FAQ (updated 20 August 2025): orders issued 25 June 2025 under 21 U.S.C. 2313a (FEND Off Fentanyl Act), using section 9714 special measures, bar covered US institutions from sending or receiving funds to or from Mexico's CIBanco, Intercam and Vector; the effective date was extended to 20 October 2025; the orders have no expiry. (Source: fincen.gov, accessed 2026-10-22)
Treasury, 24 August 2026: launched Operation Economic Outcast against Iran, with E.O. 13902 sector determinations for digital assets, technology, gold, aviation and shipping and nearly 60 designations; warned that OFAC can prohibit or strictly condition the US correspondent or payable-through accounts of foreign financial institutions that knowingly facilitate significant transactions for designated persons. (Source: content.govdelivery.com, accessed 2026-10-22)
Treasury, 4 September 2026: OFAC designated Türkiye's Golden Global Bank under E.O. 13902, saying it knowingly offered correspondent banking to Iranian financial institutions; Treasury said it will keep removing such banks' access to US dollars. (Source: content.govdelivery.com, accessed 2026-10-22)
Treasury, 14 September 2026 (sb0629): OFAC designated Russia's VTB Bank under E.O. 13902, saying it established correspondent banking relationships with sanctioned Iranian financial institutions and a rial-ruble settlement system using correspondent accounts. (Source: home.treasury.gov, accessed 2026-10-22)
FinCEN, 16 September 2026: held a FinCEN Exchange with global financial institutions on the networks that help Iran and its proxies use US correspondent banking relationships. (Source: fincen.gov, accessed 2026-10-22)
Treasury, 15 October 2026 (sb0660): designated Iraq's International Development Bank for Investment and Finance, which Treasury says provides US dollar access for Iran, plus two Iranian offshore banks and four exchange houses; Treasury says Iran's shadow banking networks are used to access US dollar correspondent banking relationships. (Source: home.treasury.gov, accessed 2026-10-22)
Treasury, 25 April 2023: the 2023 De-risking Strategy found profitability to be the primary driver of de-risking, shaped by AML/CFT compliance costs, and named money service businesses, diaspora remittance users, humanitarian groups and low-income populations as affected. (Source: home.treasury.gov, accessed 2026-10-22)
FATF, 18 June 2025: revised Recommendation 16 on payment transparency; for cross-border payments above USD/EUR 1,000 the payer's and payee's name, address and date of birth accompany the payment; implementation by end-2030; the changes support the G20 cross-border payments roadmap. (Source: fatf-gafi.org, accessed 2026-10-22)
FINMA, July 2026, relaying the FATF statement of 19 June 2026: Iran, DPRK and Myanmar remain jurisdictions subject to a call for action; Iran and DPRK remain subject to countermeasures. (Source: finma.ch, accessed 2026-10-22)
FSB, 9 October 2025: Roadmap policy work is largely complete but 'has not yet translated into tangible improvements for end-users at the global level', and satisfactory global improvement by the 2027 timetable is unlikely. (Source: fsb.org, accessed 2026-10-22)
FSB 2025 consolidated progress report: more than 50% of wholesale payments credited within one hour and above 90% within one business day; global average remittance cost 6.5% for USD 200 and 4.3% for USD 500 in 2025, stable versus 2024; 78.7% of adults have a transaction account. (Source: fsb.org, accessed 2026-10-22)
Swift, 25 November 2025: the MT/ISO 20022 coexistence period for cross-border payment instructions ended on 22 November 2025; adoption reached 97% after the cutover weekend; unstructured postal addresses are to be removed after 14 November 2026. (Source: swift.com, accessed 2026-10-22)
Swift, 9 July 2026: its blockchain-based ledger is ready for initial use, with 17 banks from six continents set to pilot live 24/7 cross-border payments with tokenised deposits, final settlement still via existing systems; no go-live date given. (Source: swift.com, accessed 2026-10-22)
BIS Innovation Hub: Project Agorá (seven central banks, over 40 financial institutions) targets the delays, costs and opacity of correspondent banking with tokenised deposits and central bank reserves on a unified ledger; the page (updated October 2025) expected the phase to conclude in the first half of 2026 and reports no test results. (Source: bis.org, accessed 2026-10-22)
BIS Innovation Hub: mBridge, a multi-CBDC platform of the central banks of Hong Kong, Thailand, China (PBOC Digital Currency Institute), the UAE and, from 2024, Saudi Arabia, reached MVP in mid-2024; in October 2024 the BIS said it was handing the project over to the partners; the page says correspondent banking 'has been in retreat' in some jurisdictions. (Source: bis.org, accessed 2026-10-22)
Shanghai municipal government, 8 January 2025: CIPS had processed about 600 trillion yuan cumulatively by end-2024; cross-border RMB payments were 175 trillion yuan in 2024, up 43%; CIPS reaches 185 countries and regions through over 4,800 banking institutions. (Source: english.shanghai.gov.cn, accessed 2026-10-22)