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What does correspondent banking mean?

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A correspondent bank is a financial institution that works with or provides services to another one, often in another country. The corresponding bank serves as an intermediary that facilitates wire transfers, executes business transactions, gathers documents for other banks, and accepts deposits.

Domestic banks commonly use correspondent banks to complete transactions that involve other countries. Domestic banks may use correspondent banks to participate in foreign financial markets and serve international clients without needing to open branches abroad.

Some of the services corresponding banks provide are: settlement, funds, check clearing, and wire transfers.

Which banks are considered correspondent banks?

When it comes to USD currency, there are a few leading correspondent banks. These are:

  • JPMorgan Chase Bank National Association
  • Citibank NA
  • The Bank of New York Mellon
  • Standard Chartered Bank
  • Wells Fargo Bank National Association

What are the issues with correspondent banking?

Correspondent banking is essential for global trade and economic growth but there are severe risks, including money laundering and terrorist financing. To protect the financial system, regulatory authorities and financial institutions need to work together to follow regulations such as third party compliance program, Know Your Client.

What is an example of a correspondent bank?

An example of a correspondent bank would be a small domestic bank in Brazil that accept clients in Europe and North America. But because it doesn’t have any European or North American branches, it uses a correspondent bank to transfer money and complete financial transactions.

What Is the difference between a correspondent bank and an intermediary bank?

Correspondent banks and intermediary banks are both third-party banks used by beneficiary banks or receiving banks for international fund transfers and transaction settlements. The main difference between correspondent banks and intermediary banks is how many currencies are used in a transaction; correspondent banks handle more than one currency and intermediary banks typically work with one.

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