39Prohibition on establishing or continuing business relationship involving shell bank

1. A reporting entity must not establish or continue a business relationship with, or allow an occasional transaction or activity to be conducted through it by,—

2. a shell bank; or
3. a financial institution that has a correspondent banking relationship with a shell bank.

4. For the purposes of subsection (1), a shell bank is a corporation that—

5. is incorporated in a foreign country; and
6. is authorised to carry on banking business in its country of incorporation; and
7. does not have a physical presence in its country of incorporation; and
8. is not an affiliate of another corporation that—
   1. is incorporated in a particular country; and
   2. is authorised to carry on banking business in its country of incorporation; and
   3. is sufficiently supervised and monitored in carrying on its banking business; and
   4. has a physical presence in its country of incorporation.

9. For the purposes of paragraph (d) of the definition of shell bank in subsection (2), a corporation is affiliated with another corporation only if—

10. the corporation is a subsidiary of the other corporation; or
11. both corporations are under common effective control; or
12. both corporations are declared to be affiliated in accordance with regulations (if any).

13. For the purposes of the definition of shell bank in subsection (2), a corporation has a physical presence in a country if, and only if,—

14. the corporation carries on banking business at a place in that country; and
15. banking operations of the corporation are managed and conducted from that place.