An intermediary bank is a financial institution that acts as a middleman between the sender and the receiving bank in an international wire transfer
. It is required when an international transfer is taking place between two countries that may not have an established financial relationship
. The main role of an intermediary bank is to facilitate smooth, speedy, and seamless cross-border payments
. Key aspects of intermediary banks include:
- Function : Intermediary banks act as a go-between, connecting two different banks for international transactions
. They help banks consolidate account and branch locations, and they are needed to conduct due diligence to avoid fraud, money laundering, and other illicit activities
- Example : In a cross-border transaction, the originator's bank (A) sends money to the recipient's bank (C). If bank A does not have an account with bank C, it must route the funds through an intermediary bank (B) to facilitate the transaction
- Cost : Frequent international wire transfers through an intermediary can be expensive
. It is essential to contact your bank directly to ask if and how much they charge for initiating such transfers.
- Intermediary vs. Correspondent Banks : Both correspondent and intermediary banks are third-party banks used by beneficiary banks to execute international fund transfers and transactions
. The main difference between the two is the number of currencies they handle
. Intermediary banks are often used when there is no working relationship between the issuing and receiving banks
As a merchant, you generally do not need detailed intermediary bank information, as these relationships are usually established between banks
. However, you may need to provide the intermediary bank's name, location, and SWIFT/BIC code for international transactions
