Can letters of credit trigger BSA rules?
Q. We are a U.S. bank that also has international branches and customers. One of our customers exports goods to China and has obtained a letter of credit from a foreign bank. The customer wants to use this letter of credit to secure a loan with our bank. We assessed the risk and decided that we =0) || (navigator.userAgent.indexOf(“WebTV”) >= 0)) { document.write(”); document.write(”); } //–> can grant our customer a $5 million loan on this basis. Our internal auditors have now told us that giving the customer this loan makes the customer a foreign correspondent for Bank Secrecy Act purposes. Is this true? A. I do not believe that this transaction makes your customer a “foreign correspondent” for BSA/AML purposes. The foreign bank issuing the Letter does not currently have, and has no intention of maintaining, an account with your bank. The BSA regulations define a foreign correspondent account as “an account established for a foreign financial institution.” (See 31 CFR [section] 103
