Correspondent Banking AML Requirements for Gulf Banks: A GCC Compliance Guide

AML Guide · August 2026

Correspondent banking relationships are a critical artery of international finance, and for Gulf banks they represent a bridge to global capital markets, US dollar liquidity and trade settlement networks.

FATF Recommendation 13 and Its Relevance to Gulf Banks

FATF Recommendation 13 sets out the international standard for correspondent banking relationships. It requires that financial institutions conducting correspondent banking activities apply enhanced due diligence, including gathering sufficient information about the respondent institution, understanding the nature of its business, assessing its AML/CFT controls and obtaining senior management approval before establishing the relationship.

Critically, FATF Recommendation 13 also addresses two specific risks: the prohibition on entering into relationships with shell banks, and the requirement to gather information about the respondent bank’s customer base where the correspondent relationship involves processing transactions for those customers (known as “payable-through accounts”).

The FATF Guidance on Correspondent Banking, first published in 2016 and subsequently updated, provides additional direction on risk-based application of these requirements and addresses the growing phenomenon of de-risking, where correspondent banks exit relationships in response to perceived compliance costs.

For Gulf banks, FATF Recommendation 13 is not directly enforceable domestic law. However, it provides the architecture upon which each GCC state’s domestic correspondent banking requirements are built. Understanding the FATF standard helps compliance professionals appreciate the direction of national regulatory intent and the expectations of international correspondent counterparties.

Saudi Arabia SAMA Correspondent Banking Requirements

The Saudi Arabian Monetary Agency (SAMA) AML/CFT Guidelines require Saudi banks to apply enhanced due diligence when establishing and maintaining correspondent banking relationships. SAMA’s requirements align broadly with FATF Recommendation 13, including obligations to assess the respondent bank’s reputation, AML/CFT controls, regulatory standing and the quality of supervision applied to that institution.

Saudi banks are required to document the purpose and intended nature of each correspondent relationship and to conduct periodic reviews. SAMA’s supervisory engagement with banks includes assessment of correspondent banking controls, and SAMA has communicated expectations that Saudi banks maintain clear policies governing correspondent relationship termination, particularly where suspicious activity is identified.

Saudi Arabia’s FATF mutual evaluation report identified correspondent banking as an area requiring ongoing supervisory attention, noting that the quality of correspondent banking oversight varied across the sector. For compliance teams at Saudi banks, this means that building robust correspondent banking policies is not only a regulatory obligation but a practical necessity when responding to correspondent bank due diligence questionnaires from international counterparties.

UAE Central Bank Correspondent Banking Requirements

The UAE Central Bank’s AML/CFT Regulation, issued under Federal Law No. 20/2018 on Anti-Money Laundering, requires UAE-licensed banks to apply enhanced due diligence for correspondent banking relationships. The requirements cover all the elements specified in FATF Recommendation 13, with additional expectations around transaction monitoring for correspondent accounts.

UAE banks face a particularly complex operating environment. They maintain relationships with correspondent banks in jurisdictions subject to varying levels of FATF scrutiny, process US dollar transactions through correspondent relationships that may trigger US regulatory obligations, and serve as correspondent banks for smaller Gulf and regional institutions.

The UAE Central Bank has published specific guidance on correspondent banking, requiring UAE banks to conduct thorough assessment of respondent banks before establishing relationships and to implement ongoing monitoring. The Central Bank’s supervisory framework includes review of correspondent banking files during regulatory examinations.

UAE banks’ US dollar correspondent relationships are a particular focus area. Where a UAE bank processes US dollar payments, it typically routes those transactions through a US correspondent bank, which subjects the relationship to scrutiny under US law, including requirements administered by the Office of Foreign Assets Control (OFAC) and the broader US sanctions framework. This intersection between UAE domestic AML obligations and US regulatory reach is a defining feature of correspondent banking compliance in the Emirates.

Qatar QCB AML/CFT Instructions on Correspondent Banking

The Qatar Central Bank (QCB) AML/CFT Instructions require Qatari banks to apply enhanced due diligence for correspondent banking relationships. The QCB framework incorporates FATF Recommendation 13 obligations, requiring banks to understand the nature of the respondent bank’s business, assess its AML/CFT controls and obtain senior management approval.

Qatar’s financial sector is relatively concentrated, with several large institutions serving as correspondent banks for smaller regional entities. This creates a situation where Qatari banks simultaneously act as correspondent and respondent institutions, requiring them to manage both sets of obligations simultaneously.

The QCB has emphasised the importance of correspondent bank due diligence questionnaires, expecting Qatari banks to respond comprehensively to requests from international correspondent banks while applying equally rigorous standards to their own correspondent relationships.

Kuwait CBK Instructions on Correspondent Banking

The Central Bank of Kuwait (CBK) AML/CFT Module requires Kuwaiti banks to conduct enhanced due diligence for correspondent banking relationships. The CBK framework requires assessment of respondent bank reputation, regulatory compliance and AML/CFT controls, with obligations for senior management sign-off and periodic review.

Kuwaiti banks’ correspondent banking relationships have faced scrutiny as part of broader regional de-risking trends. The CBK has engaged with international counterparts where relationship terminations have created operational challenges for Kuwaiti institutions, though the CBK’s primary focus remains ensuring that domestic banks meet their own compliance obligations rather than influencing correspondent bank decisions by counterparty institutions.

Oman CBO Correspondent Banking Requirements

The Central Bank of Oman (CBO) AML/CFT Regulation establishes correspondent banking due diligence obligations for Omani banks. The CBO requires that banks assess the correspondent banking risk posed by each relationship, apply enhanced due diligence proportionate to that risk and maintain documentation sufficient to satisfy regulatory examination.

Oman’s position as a smaller Gulf economy means that Omani banks’ correspondent banking networks are typically less extensive than those of Saudi, UAE or Qatari institutions. However, this does not reduce the compliance obligations applicable to each relationship, and the CBO has communicated expectations that Omani banks treat correspondent banking as a high-risk activity requiring ongoing senior management attention.

Bahrain CBB AML Module on Correspondent Banking

The Central Bank of Bahrain (CBB) AML Module contains specific provisions on correspondent banking, requiring Bahraini banks to apply enhanced due diligence consistent with FATF Recommendation 13. The CBB framework is regarded as one of the more developed in the Gulf region, reflecting Bahrain’s role as a regional financial centre.

The CBB requires banks to document assessments of respondent banks, including the quality of the respondent’s AML/CFT controls, the regulatory environment in which it operates and the nature of the business it conducts. The CBB also requires that banks do not enter into correspondent relationships with shell banks and that they take reasonable steps to confirm that respondent banks do not permit shell banks to use their accounts.

Bahrain’s status as a hub for Islamic finance means that Jafari banking correspondent relationships (correspondent arrangements involving Sharia-compliant banking institutions) require particular attention, as the customer base of Jafari banks may include sectors that warrant enhanced scrutiny.

Reverse Due Diligence Responding to Counterparty Assessments

An aspect of correspondent banking compliance that Gulf banks frequently encounter is reverse due diligence, where an international correspondent bank sends a detailed questionnaire requesting information about the Gulf institution’s AML/CFT controls, risk management framework and regulatory standing.

Responding to these questionnaires is both a commercial and a compliance matter. A poorly structured response can accelerate a correspondent bank’s decision to exit the relationship. Gulf banks should maintain a coordinated response function that brings together compliance, legal and relationship management expertise.

International correspondent banks typically assess Gulf institutions against their own internal risk appetite frameworks, which may reference FATF high-risk jurisdiction assessments, media and reputational intelligence, and the quality of the Gulf institution’s own AML programme. A Gulf bank’s ability to demonstrate a mature, well-documented AML framework can be decisive in retaining correspondent access.

Shell Bank Prevention in Gulf Correspondent Banking

FATF Recommendation 13 requires that financial institutions take reasonable steps to ensure they do not enter into correspondent banking relationships with shell banks. For Gulf banks, this obligation requires verifying that respondent institutions have a genuine physical presence, substantive mind and management, and are not incorporated or domiciled in a jurisdiction where they have no meaningful presence.

The UAE Central Bank has reinforced this obligation, and UAE banks are expected to maintain procedures for confirming respondent bank substance. The practical challenge is that shell banks may present as legitimate institutions during the onboarding process, making it necessary to verify corporate registrations, regulatory licences and physical office existence through multiple independent channels.

De-risking and the GCC

The withdrawal of correspondent banking relationships from Gulf institutions has been a persistent concern. While the GCC states have made significant progress in strengthening their AML/CFT frameworks in response to FATF mutual evaluation processes, the perception of elevated regional risk in parts of the international banking community continues to create pressure on correspondent relationships.

De-risking in the Gulf is not a uniform phenomenon. It affects different jurisdictions, bank sizes and business lines differently. Saudi and UAE banks, with their stronger balance sheets and regulatory standing, have generally been less exposed to correspondent relationship losses than smaller Gulf institutions. However, the broader trend has been a reduction in the number of correspondent banking routes available from the Gulf, particularly for smaller transaction sizes and in trade finance corridors.

The practical consequence of de-risking for Gulf financial institutions is that maintaining correspondent relationships requires proactive compliance investment. Institutions that can demonstrate robust AML programmes, provide transparent responses to reverse due diligence questionnaires and maintain constructive engagement with their regulators are better positioned to retain and develop their correspondent networks.

What Gulf Banks Should Consider

Correspondent banking compliance in the Gulf operates at the intersection of multiple regulatory frameworks. The obligations of each GCC state regulator must be met, while the requirements of international correspondent counterparties, US regulatory authorities and FATF standards all shape the compliance landscape.

For compliance leaders at Gulf banks, several practical steps follow from this complexity. First, correspondent banking policies should be reviewed against the requirements of the bank’s home regulator and against FATF Recommendation 13 to identify any gaps. Second, the reverse due diligence response function should be resourced and structured to provide timely, comprehensive responses to international counterparties. Third, transaction monitoring for correspondent accounts should receive attention commensurate with the risk these accounts represent. Fourth, shell bank verification procedures should be tested and updated regularly.

A unified view of correspondent banking risk across the customer lifecycle, from onboarding through ongoing monitoring to relationship termination, is essential for Gulf institutions operating in this environment.