Updated
GL-C-05
Glossary · Banks and finance
Correspondent bank - the intermediary your transfer passes through
An intermediary bank through which your bank routes international payments, especially in US dollars. Because of it, even a local transfer passes through US compliance.
01 / In 30 seconds
The short answer
- What it is
- An intermediary bank through which your bank makes international payments
- Why it is needed
- Banks do not have direct links with all others — they pay through correspondents
- Distinctive feature
- Dollar payments go through US banks and their compliance
- Why it matters
- Sanctions or risk can block even a “local” transfer
- Can you prepare
- Yes: plan the payment route and compliance in advance
02 / In plain words
What Correspondent bank means
A correspondent bank is an intermediary bank through which your bank makes payments to other countries and in other currencies. One bank does not hold direct accounts with every bank in the world, so transfers go along a chain: your bank — the correspondent — the recipient’s bank. It is invisible to you, but that is exactly where money often gets stuck.
This is especially true of dollar payments: almost all of them pass at some point through American correspondent banks, and so through US compliance and FATCA and sanctions rules. Even if neither the sender nor the recipient is in the US, the dollar “enters” the American system, and the correspondent may hold or return a payment if it sees a sanctions or reputational risk.
The conclusion for the client: the payment route matters. A transfer may be lawful but get stuck at a correspondent because of the country, the wording of the payment reference or a link to sanctions. That is why large international payments are planned in advance — taking into account the currency, the chain of banks and how compliance will see them at each link.
A case from practice
A client sends a lawful dollar payment between two non-American banks. The payment passes through a correspondent bank in the US, and its compliance holds the transfer because of the sender’s country and an unclear payment reference. With documents prepared in advance and a correct reference, the payment goes through.
Where the correspondent matters
- International transfers
- Dollar payments
- Paying for an investment abroad
- Settlements between countries
- Large sums
- Payments from “high-risk” countries
03 / What it covers
How the chain works
Route
- Your bank
- The correspondent bank
- The recipient’s bank
Currency
- Dollar — through the US
- Euro — through the EU
- Compliance along the way
Risk
- A sanctions link
- The sender’s country
- The payment reference
What helps
- A transparent payment reference
- Planning the route
- A clean origin of funds
04 / How it works
How to make a payment without it being blocked
Assess the route and currency
Currency and the banks along the payment route.
Prepare the payment reference and documents
Contract, invoice, clear payment purpose.
Send the payment
The bank sends a SWIFT message.
Passing through the correspondents
Each correspondent checks the payment.
The money reaches the recipient
The recipient's bank credits the money.
05 / Key facts
What you need to know
01Why it exists
The payment chain
A bank has no accounts with every bank in the world. A transfer goes: your bank - correspondent - recipient's bank.
02The dollar
Through US banks
Almost all dollar payments pass through US correspondents, their compliance and sanctions rules.
03Risk
Delay or return
A correspondent can stop a lawful payment because of the country, the payment purpose or a sanctions link.
04What helps
Planning the route
Currency, bank chain, a clear payment purpose and source-of-funds documents before sending.
Common mistakes
Forgetting the dollar goes through the US
For sensitive routes, consider another currency or route.
Writing a vague payment purpose
State the contract, invoice and nature of the payment in plain words.
Not preparing documents on the money
Keep the contract and proof of source of funds at hand in case of a request.
06 / Expert advice
How to prepare in advance
Large international payments are planned in advance: the currency and the chain of banks are considered, a transparent payment reference and documents on the origin of the money are prepared, and it is assessed how compliance will see the payment at each link. Sometimes the currency or the route is changed to avoid a bottleneck. Then the money arrives without delays or returns.
What we do for you. We help make a large international payment so that it does not get stuck at a correspondent: we think through the currency and route and prepare a transparent payment reference and documents on the origin of the money — with compliance at every link of the chain in mind.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
Banks do not have direct links with every bank in the world. Payments to other countries and currencies go through intermediary correspondents along a chain.
Dollar settlements pass at some point through American correspondent banks, and so through US compliance and FATCA and sanctions rules.
Yes. A correspondent may hold or return a transfer because of the country, the reference or a sanctions risk, even if the transaction itself is lawful.
Find out the reason (country, reference, risk), prepare documents and the reference, and if necessary change the currency or route. We help set this up.
By planning the route and currency and preparing a transparent payment reference and documents on the origin of the money — with compliance at every link of the chain in mind.
Yes: correspondents, like banks, avoid risky payments pre-emptively. That is why the route and preparation matter.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
