Correspondent banking, a relationship where one bank provides financial services to another bank on its behalf, typically across borders, plays an essential role in the global financial system. It enables cross-border payments, trade finance, and access to international markets. Within this ecosystem, payable-through accounts (PTAs) are one of several arrangements used to facilitate customer transactions across jurisdictions and currencies.

In many cases, PTAs support legitimate financial activity, particularly in markets where access to international banking infrastructure is limited. However, they are widely recognised by regulators as a higher-risk compared to standard correspondent arrangements. With the potential to reduce transparency and create indirect customer relationships, they continue to attract sustained supervisory attention.

As financial crime expectations continue to rise, grasping what regulators, particularly the Financial Action Task Force (FATF), expect from banks that offer PTAs, and how financial institutions can identify and manage PTA-related risk in practice, is essential. 

What Are Payable-Through Accounts and How Do They Work?

So, how do PTAs operate? A payable-through account is a correspondent banking arrangement where the customers of a respondent bank are able to transact through the correspondent bank’s account.

In a standard correspondent banking relationship, the correspondent bank processes transactions on behalf of the respondent bank itself. The respondent remains the sole customer of the correspondent. In AML terms, the correspondent’s AML obligations focus primarily on the respondent as a legal entity.

In a PTA arrangement, while the account is still held in the respondent bank’s name, the correspondent processes transactions as if those underlying customers were its own, without having a direct customer relationship with them.

PTAs tend to follow a relatively consistent structure:

1. The correspondent bank opens an account in the name of the respondent bank.

2. Within that account, sub-accounts, unique identifiers, or internal references are assigned to individual customers of the respondent bank.

3. Multiple customers transact through the same correspondent account using those identifiers.

4. Payment messages identify the respondent’s customers as originators or beneficiaries.

5. Operationally, the correspondent bank processes these transactions as if the respondent’s customers were its own customers.

Here transparency and control can begin to weaken. While transaction data may reference underlying customers, the correspondent bank’s understanding of who those customers are, and whether they present elevated risk, depends heavily on the respondent bank’s controls, systems, and willingness to share information.

Why Payable-Through Accounts Demand Heightened AML Scrutiny

PTAs introduce several interrelated AML risks that go beyond those of standard correspondent banking:

• The correspondent bank has only an indirect relationship with the underlying customers, limiting visibility into customer identity, business purpose, and expected activity. 

• AML controls are fragmented. The correspondent must rely heavily on the respondent bank’s customer due diligence, transaction monitoring, and sanctions screening frameworks. Weaknesses or gaps in those systems are inherited by the correspondent.

• PTAs create ‘look-through’ risk, where the correspondent cannot independently verify the identities of underlying customers. It may be unable to assess whether transactions align with stated business activities or whether customers pose elevated risk.

• Nested correspondent banking relationships – when a respondent bank provides correspondent services to other financial institutions through its own correspondent account, without the correspondent bank’s knowledge or approval – can be obscured by PTAs. 

• PTAs may increase exposure to high-risk or sanctioned jurisdictions, particularly where respondent banks or customers are engaged in cross-border activity involving higher-risk markets.

FATF Guidance on Payable-Through Accounts

What are the global standards for PTAs, and how do they shape supervisory expectations? The FATF offers explicit guidance on correspondent banking risk primarily through Recommendation 13, which sets out expectations for banks establishing and maintaining correspondent relationships (1).

While not prohibiting payable-through accounts, the FATF recognises them as higher-risk arrangements that warrant enhanced due diligence and ongoing oversight (2).

For banks offering PTAs, expectations are to:

• Apply enhanced due diligence to respondent banks.

• Develop a clear understanding of the nature of the respondent’s business, including its customer base and the purpose of the relationship.

• Monitor PTA transaction activity on an ongoing, risk-based basis, rather than relying solely on onboarding assessments.

• Assess the respondent’s AML framework by obtaining assurance that the respondent:
  
  

  • Performs adequate customer due diligence on its customers

  • Conducts ongoing transaction monitoring

  • Is able to provide underlying customer information upon request

These send a clear supervisory message: offering PTAs poses an increased compliance risk, and requires more diligence than standard correspondent controls.

Common Red Flags of AML Risks with Payable-Through Accounts

Though not inherently problematic, AML teams should remain alert to certain indicators that may suggest elevated PTA risk, including:

• The respondent bank being unable or unwilling to identify underlying customers.

• Transaction volumes or values being inconsistent with the respondent’s stated business profile.

• Payment messages containing missing, vague, or incomplete originator or beneficiary information.

• PTAs being used by non-bank entities, such as money services businesses.

• Activity involving high-risk or sanctioned jurisdictions without a clear economic rationale.

• The respondent resists audits, enhanced reviews, or information requests.

It’s worth keeping in mind that these indicators may not be determinative on their own, but patterns or combinations should prompt escalation and deeper investigation.

Risk Appetite and Restricting Payable-Through Accounts 

Given the elevated risks associated with payable-through accounts, many banks have reassessed how these arrangements fit within their correspondent banking strategies. 

Some institutions choose to prohibit the accounts entirely, determining that the financial crime risk outweighs the commercial benefits. Others permit PTAs only for low-risk respondent banks, often subject to strict eligibility criteria, clear use-case definitions, and limitations on jurisdictions or customer types.

It’s important to note that these decisions are typically driven by risk appetite, rather than regulatory mandates. The objective is not to eliminate correspondent banking, but to ensure that the level of risk assumed remains manageable and defensible.

Payable-Through Account Risk Management: A Matter of Balance

Payable-through accounts introduce an additional layer of complexity to correspondent banking relationships. The indirect nature of customer relationships, reliance on third-party controls, and potential for reduced transparency all heighten financial crime risk. Managing PTA risk effectively requires strong governance, the ability to obtain timely information on underlying customer activity, and ongoing, risk-based oversight. 

Ultimately, the challenge of sustainable correspondent banking is to balance access to global financial services with robust controls that protect the integrity and compliance of the correspondent relationship. For AML teams, payable-through accounts remain a clear test of that balance.