Payable through accounts

In some correspondent relationships, the respondent bank’s
own customers are permitted to conduct their own transactions
— including sending wire transfers, making and withdrawing
deposits and maintaining checking accounts — through the
respondent bank’s correspondent account without needing to
clear the transactions through the respondent bank. Those
arrangements are called payable-through accounts (PTAs). PTAs
differ from normal correspondent accounts in that the foreign
bank’s customers have the ability to directly control funds at
the correspondent bank. This is different from the traditional
correspondent relationship, where the respondent bank will
take orders from their customers and pass them on to the
correspondent bank. In these cases, the respondent bank has the
ability to perform some level of oversight prior to executing the
transaction.
PTAs can have a virtually unlimited number of sub-account holders,
including individuals, commercial businesses, finance companies,
exchange houses or casas de cambio, and even other foreign
banks. The services offered to the “subaccount holders” and the
terms of the PTAs are specified in the agreement signed by the
correspondent and the respondent banks.
PTA accounts held in the names of respondent banks often involve
checks encoded with that bank’s account number and a numeric
code to identify the sub-account, which is the account of the
respondent bank’s customer. Sometimes the sub-account holders
are not identified to the correspondent bank.
Elements of a PTA relationship that can threaten the correspondent
bank’s money laundering defenses include:


Risks andMethods of Money Laundering and terrorist financing
􀂄 PTAs with foreign institutions licensed in offshore
financial services sectors with weak or absent bank
supervision and weak licensing laws.
􀂄 PTA arrangements where the correspondent bank
regards the respondent bank as its sole customer and
fails to apply its Customer Due Diligence policies and
procedures to the customers of the respondent bank.
􀂄 PTA arrangements in which sub-account holders have
currency deposit and withdrawal privileges.
􀂄 PTAs used in conjunction with a subsidiary,
representative or other office of the respondent bank,
which may enable the respondent bank to offer the
same services as a branch without being subject to
supervision.
Example
Lombard Bank — a bank licensed by the South
Pacific island of Vanuatu, which is considered by
many experts as a tax and money laundering haven
— opened a payable-through account at American
Express Bank International (AEBI) in Miami. The
Vanuatu bank offered its Central American customers
virtually full banking services through its payablethrough
account at AEBI. The customers were given
checkbooks allowing them to deposit and withdraw
funds from Lombard’s payable-through account.
Lombard was permitted to have multiple authorized
signatures on the account. The Lombard customers
had no relationship with AEBI. The sub-account
holders would bring cash deposits to Lombard
representatives in four Central American countries.
Lombard couriers would transport the cash to its
Miami affiliate, Lombard Credit Corporation, for deposit
in the payable-through account at AEBI. Lombard
customers also brought cash to the Lombard office
in Miami, which was located in the same building as
AEBI. That cash also was deposited in the payable

through account at AEBI. Over two years, ending June
1993, as much as $200,000 in cash was received by
Lombard’s Miami affiliate on 104 occasions.