How AML de-risking is reshaping correspondent banking: evolution, risk, and the road ahead

The unintended consequences were significant—and long-lasting.

The real impact: a fragmenting global financial system

Loss of financial inclusion

Small banks in developing economies lost access to correspondent relationships, making it harder for citizens and SMEs to receive remittances, access foreign currency, or trade internationally. This created a growing gap between developed and emerging markets.

Higher financial crime risk

Contrary to the intent, de-risking can actually increase financial crime by driving activity to informal channels with limited oversight.

Rising costs for legitimate trade

As correspondent options shrink, pricing increases—affecting small economies that already face higher operating costs.

Market consolidation

Large global banks with strong compliance programmes gained dominance, while smaller institutions became dependent on a shrinking pool of clearing partners.

The shift toward ‘intelligent’ financial crime risk management

The last five years have brought a new understanding: de-risking is not risk management.

Global regulators now urge banks to assess risk with proportionality, apply enhanced due diligence where needed, maintain financial access where possible, and leverage technology to improve monitoring.

This evolution has pushed the industry toward risk-optimised, rather than risk-eliminating, models.

How technology can transform correspondent banking risk

Technology offers practical, scalable pathways for banks to maintain global connectivity without exposing themselves to unacceptable risk.

AI-driven transaction monitoring and behavioural analytics

Modern analytics can detect anomalies in correspondent flows by learning patterns of expected behaviour, deviations tied to specific geographies, structured or layered activity, or nested relationships within correspondent accounts.

AI allows banks to review far larger data volumes, segment correspondent flows more accurately, reduce false positives, and identify genuine threats faster.

This supports safe continuation of relationships even where risk is high.

Digital Identity, KYC Utilities, and Beneficial Ownership Networks

Correspondent banking collapses largely due to information asymmetry—the respondent bank often cannot provide the transparency the correspondent needs.

New initiatives improve visibility across borders:

• LEIs and digital identity frameworks

• KYC utilities (e.g., SWIFT KYC Registry)

• Cross-border beneficial ownership registries

• Privacy-preserving data-sharing protocols

When transparency increases, the risk premium reduces, making relationships easier to maintain.

Real-time screening & risk scoring for nested relationships

Nested accounts are among the highest-risk areas in correspondent banking. Modern tools can now map nested payment structures, analyse multi-tier flows, assign risk tiers in real-time, and detect hidden intermediaries.

This level of granularity did not exist 10 years ago.

Synthetic data for scenario testing and system optimisation

Banks can now use synthetic data to: simulate correspondent flows, test scenarios that rarely appear in real data, stress-test TM models, validate rules before go-live, and avoid triggering real alerts that require human review.

This will be essential as the complexity of cross-border flows increases.

The future: could stablecoins or CBDCs replace correspondent banking?

A growing question in the industry is whether traditional correspondent banking could be replaced—or complemented—by tokenised or blockchain-based alternatives.

Here’s what the future may look like:

Stablecoins as an alternative cross-border rail

Regulated, fiat-backed stablecoins could settle cross-border payments instantly, reduce dependence on multi-bank correspondent chains, provide 24/7 liquidity, and bring transparency through blockchain auditability.

Institutions such as JP Morgan (JPM Coin) and licensed stablecoin issuers are already exploring this model.

However, the key challenges include regulatory uncertainty, fragmentation of standards, wallet-level KYC, and sanctions enforcement on-chain.

Stablecoins could supplement—but not fully replace—correspondents in the near term.

CBDCs and multi-CBDC corridors (mBridge model)

Central bank digital currencies have the potential to fundamentally redefine cross-border settlement.

The mBridge project (involving BIS, China, Hong Kong, Thailand, and UAE) already demonstrates real-time cross-border settlement, atomic (instant) payment vs payment, reduced reliance on correspondent banks, and direct central bank-to-central bank clearing.

If widely adopted, multi-CBDC platforms could drastically reduce the need for:

• USD clearing dominance;
• Nostro/Vostro accounts;
• long settlement chains.

Yet, adoption will be slow and heavily political.

Tokenised deposits and regulated blockchain infrastructure

Many banks are exploring tokenised commercial bank money—which offers enhanced AML traceability, programmable compliance, and instant cross-bank interoperability.

This model is often seen as the most realistic evolution, offering innovation without abandoning the regulated banking system.

Conclusion: the correspondent banking model is being rebuilt – not removed

AML de-risking reshaped global finance after 2012. Today, with new regulatory clarity and better technology, the industry is moving toward a more balanced model—one that supports risk management and global financial inclusion.

Correspondent banking will not disappear, but it will evolve into a more transparent network, powered by better data and technology, supported by AI-driven controls, and increasingly supplemented by digital currency infrastructures.

Financial institutions that adapt early—embracing intelligent risk management and next-generation payment rails—will be the ones shaping the future of cross-border finance.

About author

With over 20 years of experience across leading financial institutions — including ECB, JP Morgan, HSBC, Citi, Standard Chartered, Schroders, ING, and fintechs such as Uphold — Oonagh combines deep regulatory expertise with genuine purpose. 

Her mission is simple yet powerful: to make compliance human, intelligent, and ethical, not bureaucratic. As the Founder of RAW Compliance and Virtual Risk Solutions (VRS), she has built global ecosystems where compliance professionals learn, collaborate, and share freely, breaking down silos and empowering the next generation — from aspiring analysts to seasoned CCOs. Oonagh is one of the few global leaders actively shaping the future of AI governance and ethical innovation, building real frameworks that ensure technology never outpaces integrity. She works at the intersection of regulation, AI, and risk, driving alignment between innovation and accountability.

About VRS

If your organisation is navigating the impact of AML de-risking, reassessing correspondent banking relationships, or exploring how technology, AI, and emerging digital currency models (including stablecoins and CBDCs) can strengthen your cross-border risk management, VRS can support you. 

For guidance on building intelligent, data-centred GRC frameworks, modernising financial crime controls without resorting to de-risking, enhancing correspondent banking due diligence, integrating AI, behavioural analytics, or synthetic data into your monitoring models, preparing for future infrastructures such as tokenised money, stablecoin rails, and multi-CBDC corridors, and designing governance models that are resilient, scalable, and regulator-ready. Contact Oonagh directly at oonagh@virtualrisksolutions.com.