Nested Correspondent Banking Example
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Nesting is a relatively common practice.
Nested correspondent banking example. 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. Nested correspondent accounts take the inherent risk associated with correspondent accounts and increases it by 1000. 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.
It then instructs bank of ice cream to transfer the funds via its correspondent account to bank pies. The service provider for the nested correspondent banking account might be a mid tier bank financial technology company or a money service company. Bank by a foreign financial institution. It becomes a nested account when that institution permits another financial institution access to the account.
Correspondent accounts are the backbone for much of the international wire transfers. Nested correspondents allow an unapproved financial institution access to the. 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. 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.
Bank may establish a regular correspondent account with a service provider foreign bank. 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. It cannot channel funds through its own correspondent bank accounts to bank pies in the usa directly. 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.
