Why is correspondent banking high-risk for money laundering, and what are nested accounts?

Correspondent banking — one bank providing accounts/services to another bank to access a market or currency — is high-risk because the correspondent doesn't have a direct relationship with the respondent's underlying customers, so it can't see who's really moving money; it relies on the respondent's AML controls, which may be weaker, in higher-risk jurisdictions. Nesting (or 'downstream correspondent') is the acute risk: the respondent bank lets other institutions — that the correspondent never assessed — access the correspondent account through it, effectively giving unknown third banks indirect access to the financial system. That's how illicit flows enter via a back door. Controls: enhanced due diligence on the respondent (ownership, AML program, regulatory standing, Wolfsberg questionnaire), understanding the respondent's customer base and whether it permits nesting, prohibiting payable-through-account abuse, transaction monitoring on the correspondent flows, and not banking shell banks. It's a focus of FATF and major enforcement actions.