Nested Correspondent Banking Example
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Nested correspondents allow an unapproved financial institution access to the.
Nested correspondent banking example. The service provider for the nested correspondent banking account might be a mid tier bank financial technology company or a money service company. Correspondent accounts are the backbone for much of the international wire transfers. Bank may establish a regular correspondent account with a service provider foreign bank. 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.
It cannot channel funds through its own correspondent bank accounts to bank pies in the usa directly. It then instructs bank of ice cream to transfer the funds via its correspondent account to bank pies. Nesting is a relatively common practice. Learn what correspondent banking really is with a real world example and how it drives international.
For example bank apples in iran is a sanctioned entity. In order to get the funds to the pies account apples must place the money under a different name in an account at the bank of ice cream in lebanon which is not the subject of sanctions for example. 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. It becomes a nested account when that institution permits another financial institution access to the account.
A correspondent account is one maintained in a us. Nested correspondent banking refers to the use of a banks correspondent relationship by a number of respondent banks through their relationships with the banks direct respondent bank to conduct transactions and obtain access to other financial services. The service provider foreign bank in turn acts as a. 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.
