The Correspondent and Counterparty Risk Rating Manual (Faisal Khan LLC, Version 1.0) is a generic, adoptable template — bracketed placeholders for company name, document owner, board approval and dates — setting out the policy, procedures and risk rating methodology a company applies to every correspondent and counterparty involved in the receipt, disbursement, settlement or handling of funds.
Its scope is deliberately absolute: "This manual applies regardless of the counterparty's location, entity type, or transaction volume. No counterparty is exempt from risk rating." "Counterparty" is defined to reach any foreign or domestic bank, financial institution, paying agent, payout partner, liquidity provider or settlement partner.
The hard control is the prohibition on premature activation. No funds may be transmitted to or through a counterparty until the due diligence file is complete, the risk rating is assigned and approved, and the governing body has approved the relationship in writing.
What the manual covers:
- The four-factor scoring model — geography, entity type, the country's AML legal framework, and outstanding regulatory violations — each scored 1, 2 or 3 and totalled into Low (4–5), Medium (6–8) or High (9–12)
- Why an MSB counterparty scores 3 on entity type alone, and so cannot be rated Low Risk under the default bands
- Upward overrides by the Compliance Officer on qualitative grounds, and the rule that downward overrides are not permitted
- The six initial due diligence steps, including sanctions screening of owners, directors and senior management, and Bank Secrecy Act and USA PATRIOT Act alignment where transactions originate in the United States
- Enhanced Due Diligence for High Risk: written senior management sign-off, semi-annual review, volume or corridor limits, and exit where the risk cannot be mitigated
- OFAC zero tolerance, five-year record retention after termination, and the 17-item counterparty questionnaire in Appendix A
A template to adapt, not legal or compliance advice.