Nested Correspondent Banking Example

Bank may establish a regular correspondent account with a service provider foreign bank.

Nested correspondent banking example. It then instructs bank of ice cream to transfer the funds via its correspondent account to bank pies. A correspondent payable through a nested account is an arrangement used by some to move money between financial institutions in foreign countries and financial institutions in the united states. For example bank apples in iran is a sanctioned entity. Nested correspondents allow an unapproved financial institution access to the.

Correspondent accounts are the backbone for much of the international wire transfers. It becomes a nested account when that institution permits another financial institution access to the account. The service provider for the nested correspondent banking account might be a mid tier bank financial technology company or a money service company. Guidance on correspondent banking services this guidance should be read in conjunction with the fatf recommendations especially recommendations 1 6 7 10 11 13 14 16 20 and 26 their interpretive notes and the glossary.

Bank by a foreign financial institution. Nested correspondent accounts take the inherent risk associated with correspondent accounts and increases it by 1000. A correspondent account is one maintained in a us. It cannot channel funds through its own correspondent bank accounts to bank pies in the usa directly.

Nesting is a relatively common practice. Correspondent banking is the provision of a current or other liability account and related services to another financial in stitution including affiliates used for the execution of third party payments and trade finance as well as its own cash clearing liquidity management and sho rt term borrowing or. A nested correspondent banking account allows smaller banks to deal with providers experienced in their industry rather than with a larger bank that probably has no time for this business. The service provider foreign bank in turn acts as a.

For example a bank in san francisco that has received instructions to wire funds to a bank in japan cannot wire funds directly without a working relationship with the receiving bank.