The Basel Committee on Banking Supervision identified four risks to banking institutions as a result of an inadequate KYC program: legal, reputational, operational, and concentration. Legal risks include the potential for fines or sanctions for non-compliance with applicable laws and regulations. Reputational risks include the loss of customer confidence due to the institution's involvement in illicit activities. Operational risks include the potential for fraudulent or suspicious activity to go undetected. Finally, concentration risks involve the potential for a single customer or group of related customers to dominate the institution's operations.

These are the information that can help the correspondent bank to assess the risk profile, the regulatory compliance, and the operational capacity of the respondent bank, and to verify its identity and legitimacy. The correspondent bank should obtain and verify the following information about the respondent bank:
Respondent's management, nature of license, and major business activity. This can help the correspondent bank to understand the governance, the legal status, and the core functions of the respondent bank, and to evaluate its reputation, integrity, and competence.
The quality of supervision in the home country. This can help the correspondent bank to determine the level of oversight and regulation that the respondent bank is subject to, and to identify any potential gaps or weaknesses in the anti-money laundering and counter-terrorist financing (AML/CTF) framework of the home country.
Respondent's location, in particular the existence of a real physical presence. This can help the correspondent bank to verify the actual existence and operation of the respondent bank, and to avoid dealing with shell banks or banks located in high-risk or non-cooperative jurisdictions.
The other option is not necessarily information that should be included to establish a rigorous "Know Your Respondent" procedure, although it may have some relevance or importance depending on the circumstances and the nature of the correspondent relationship. Option 2 describes computer equipment and software capability, which may be useful to assess the technical and operational compatibility and efficiency of the respondent bank, but it is not essential to evaluate its risk or compliance level.
ACAMS CAMS Certification Video Training Course - 6th Edition1
Exam CAMS: Certified Anti-Money Laundering Specialist (the 6th edition)2 ACAMS CAMS Study Guide - 6th Edition, Chapter 7, pages 154-155
https://www.acams.org/wp-content/uploads/2019/09/ACAMS-CAMS-Study-Guide-6th-Edition-Chapter-7.pdf

Trade-based money laundering (TBML) is a method to finance terrorism that involves falsifying transaction- related documents, such as invoices, contracts, bills of lading, or customs declarations, to conceal the origin, destination, value, or purpose of illicit funds. TBML can be used to move money, goods, or services to or from sanctioned orhigh-risk jurisdictions, to evade taxes, duties, or currency controls, to launder proceeds of crime, or to support terrorist activities. TBML can involve over- or under-invoicing, over- or under-shipping, multiple-invoicing, or falsely describing goods or services. TBML can also be linked to other methods of money laundering or terrorist financing, such as bribery, black market peso exchange, or informal value transfer systems.
ACAMS CAMS Certification Video Training Course, Module 2: Compliance Standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT), Lesson 4: Trade-Based Money Laundering Money Laundering and Terrorist Financing Related to Counterfeiting of Currency, Financial Action Task Force (FATF), page 28 Tracing terrorist finances, INTERPOL

'https://www.wolfsberg-principles.com/sites/default/files/wb/pdfs/wolfsberg-standards/8.%20Wolfsberg- Correspondent-Banking-Principles-2014.pdf - page 6 Monitoring and Reporting of Suspicious Activities The institution shall implement bank-wide policies and procedures to detect and investigate unusual or suspicious activity and report any such activity as required by applicable law. These will include guidance on what is considered to be unusual or suspicious and give examples thereof. The policies and procedures shall include appropriate monitoring of the Correspondent Bank's activity, incorporating due diligence results such as customer risk rating and other factors considered meaningful in the assessment of transaction activity risk. In turn, the results of suspicious activity monitoring shall be factored into the periodic review of the client's file, particularly when the results of transaction monitoring indicate elevated risk levels.

One of the key components of an effective anti-money laundering (AML) program is to implement adequate customer due diligence (CDD) measures for new accounts. This includes verifying the identity of the party opening the account, determining the beneficial owner(s) of the account, and seeking to determine the source of deposited funds. These measures help the financial institution (FI) to understand the nature and purpose of the customer relationship, assess the risk profile of the customer, and detect and report any suspicious or unusual activity. Documenting the identity of the party opening the account and the beneficial owner(s) of the account also helps the FI to comply with the record-keeping and reporting requirements of the AML laws and regulations, and to cooperate with the authorities in case of investigations or inquiries. Seeking to determine the source of deposited funds helps the FI to prevent the introduction of illicit funds into the financial system, and to identify any discrepancies or inconsistencies between the customer's profile and activity.
1: FATF Guidance for a Risk-Based Approach for the Banking Sector1
2: OCC Bulletin 2020-10: Customer Due Diligence and Bank Secrecy Act/Anti-Money Laundering Examination Procedures2
3: ACAMS Study Guide for the CAMS Certification Examination3