One institution serves another
A correspondent financial institution provides banking services to a respondent financial institution in another country. The respondent can use these services for its customers.
Services can include payments, foreign exchange and trade finance. The relationship can exist between related institutions.
Source: AUSTRAC: Definition and types of correspondent banking relationships.
The same account, two perspectives
A vostro account is an account the correspondent provides to the respondent under the relationship.
Nostro describes an institution’s account in foreign currency at another institution. In a matching arrangement, the respondent’s nostro is the correspondent’s vostro.
The function matters. A different account label does not remove an applicable legal duty.
Source: AUSTRAC: Vostro accounts.
- Respondent: nostro
The respondent holds its foreign-currency account at the correspondent.
- Correspondent: vostro
The correspondent provides and holds the account for the respondent.
One account, two viewpoints
Invented example. Both labels refer to the same account. The label changes with the institution’s viewpoint.
Separate evidence questions. An answer to one does not settle the others.
Australian due diligence conditions
Where section 100 supplies the required geographical link, section 96 applies to relationships that involve a vostro account.
Before entry, the institution needs a due diligence assessment, its written record and senior-officer approval. Ongoing assessments and records are also required.
The shell-bank prohibition has a wider account scope. It is not limited to relationships with a vostro account.
Invented example: access to a foreign currency
In an invented arrangement, a respondent bank holds a foreign-currency account at a correspondent bank overseas. The respondent uses the account for customer payments.
The respondent describes the account as its nostro. The correspondent describes the account held for the respondent as a vostro.
These labels describe the account relationship. They do not identify every underlying customer or replace the required risk assessment.