Malaysia - U.S. Banks and Local Correspondent Banks (2024)

FAQs

What is a US correspondent bank? ›

A correspondent bank is a third-party financial institution that acts as an intermediary between domestic and international banks. Correspondent banks effectively act as an agent of a foreign bank to conduct business transactions with the domestic bank on its behalf.

Three U.S. banks have operations in Malaysia: Bank of America, Citibank, and J.P. Morgan Chase Bank. In addition, the Bank of New York Mellon, and the Northern Trust Comapany have representative offices in Kuala Lumpur.

Through correspondent banking relationships, banks can access financial services in different jurisdictions and provide cross-border payment services to their customers, supporting, inter alia, international trade and financial inclusion.

A person or entity has an account at an issuing bank. The issuing bank then uses a correspondent or intermediary bank to complete the process of moving funds to a beneficiary bank. In some countries, correspondent banks are simply a type of intermediary bank.

Correspondent banks are third-party banks. They act as middlemen between different financial institutions. As such, they provide treasury services between sending and receiving banks, especially those in different countries.

Overseas banks involved in the processing and clearance of international transfers are referred to as Correspondent or Intermediary banks. These banks generally charge fees for processing and clearing an international fund transfer and these fees vary between correspondent banks and countries.

Risks associated with correspondent banking

Correspondent banks may have no pre-existing relationships with parties with which the respondent transacts, making them vulnerable to corruption and money laundering.

Example: If a person in India wants to send money to someone in the USA, their local bank in India might not have a presence in the USA. In such cases, a correspondent bank in the USA will facilitate this transaction on behalf of the Indian bank.

How much can I be charged in correspondent fees? The amount that other banks can charge you will vary, but we estimate anywhere between 15 and 50 USD or equivalent. The fee might be higher depending on the bank.

An intermediary bank is required when making international funds transfers between the originator bank and the beneficiary bank. This only happens when the banks don't have an established relationship, such as an account that would otherwise facilitate a direct deposit in a SWIFT network.

Do I need to provide correspondent bank details? ›

A sender is not required to know intermediary bank information. This is knowledge shared between banks. Only the beneficiary bank information, including a SWIFT code and the bank account number for the beneficiary account, is needed.

Background checks: Conduct background checks on a prospective correspondent bank to identify any red flags, such as sanctions violations or legal issues. Financial performance: Review the financial performance of the prospective correspondent bank to determine if it is financially stable and can meet its obligations.

We maintain one of the largest correspondent bank networks in the U.S. and overseas. You and your customers benefit from our international reach, our relationship-based approach and high level of expertise, and our wide range of global correspondent banking services.

Correspondent banks may have no pre-existing relationships with parties with which the respondent transacts, making them vulnerable to corruption and money laundering.

High fees: Correspondent banking relationships can involve high fees, particularly for small and medium-sized financial institutions. Complexity: Correspondent banking relationships can involve multiple parties, making it difficult to manage risks and ensure compliance.