Module: General Practice
Q101: Certain correspondent banking services are classified as "Prohibited" or "High Risk" due to their potential for abuse. Which of the following statements regarding Shell Banks and Payable Through Accounts (PTAs) are correct?
A "Shell Bank" is defined as a bank incorporated in a jurisdiction where it has no physical presence and is not affiliated with a regulated financial group.
Under RBI and FATF norms, banks are strictly prohibited from entering into a correspondent relationship with a Shell Bank and must ensure their respondent banks do not permit Shell Banks to use their accounts.
A "Payable Through Account" (PTA) is a mechanism where the foreign respondent bank allows its own customers (sub-account holders) to conduct transactions directly on the correspondent account.
PTAs are considered high-risk because the correspondent bank often has no direct relationship with, or KYC data on, the sub-account holders who are accessing its system.
Under RBI and FATF norms, banks are strictly prohibited from entering into a correspondent relationship with a Shell Bank and must ensure their respondent banks do not permit Shell Banks to use their accounts.
A "Payable Through Account" (PTA) is a mechanism where the foreign respondent bank allows its own customers (sub-account holders) to conduct transactions directly on the correspondent account.
PTAs are considered high-risk because the correspondent bank often has no direct relationship with, or KYC data on, the sub-account holders who are accessing its system.
✅ Correct Answer: D
The correct answer is Option D. Shell banks are prohibited.
PTAs allow sub-account access and are high risk due to lack of direct KYC.
These high-risk services are emphasized in the IIBF AML KYC Exam 2026.
PTAs allow sub-account access and are high risk due to lack of direct KYC.
These high-risk services are emphasized in the IIBF AML KYC Exam 2026.