Cross-Border Payments Stuck in Correspondent Banks? Act Now or Face Freezing!

Cross-border payments play a critical role in the global economy, whether for corporate transactions or personal remittances. However, your cross-border payment may sometimes be investigated by a correspondent bank, causing delays or non-receipt of funds, which can disrupt your transactions and remittances.

To ensure smooth payments, it is essential to understand why they are being investigated and how to respond. This article will analyze the reasons for cross-border payment investigations by correspondent banks and provide solutions.

The Role of Correspondent Banks in Cross-Border Payments

First, the funds are initiated by the payer through the sending bank. After verification by the sending bank, the payment is sent via the SWIFT network to the correspondent bank. The correspondent bank further verifies the instructions to ensure compliance with international and local regulations, then passes the funds and instructions to the receiving bank. After review, the receiving bank credits the funds to the payee. The correspondent bank plays a crucial role in this process. They ensure accurate transmission of remittances and information, conduct anti-money laundering (AML) and counter-terrorism financing (CTF) checks, and resolve financial technology differences between banks, ensuring smooth and lawful fund flow.

“Offenses” Leading to Correspondent Bank Investigations

Incomplete or Incorrect Information

Incomplete or incorrect account information, SWIFT codes, or payee names in cross-border payments can trigger investigations by the correspondent bank. To avoid such investigations, you need to carefully check all information before submitting the payment application to ensure its accuracy. If an error is found, promptly contact the sending bank to make corrections.

Large Fund Transfers

Significantly larger fund transfers than usual are often automatically flagged as high-risk and generally subjected to further scrutiny to prevent potential money laundering or fraud. To ensure smooth transactions, payers can notify the bank in advance and provide detailed transaction information, such as contracts and invoices, to prove the legitimacy of the transaction. Your advance preparation can help the bank process the review quickly and reduce unnecessary hassle.

Violation of Relevant Regulations

Transactions involving AML and CTF regulations are strictly scrutinized. Payers should familiarize themselves with AML and CTF regulations related to remittances, ensure their transactions comply with legal requirements, provide necessary documents and information during bank reviews, and promptly respond to bank inquiries to prove the legitimacy and transparency of the transactions.

Involvement of High-Risk Countries or Regions

Payments involving high-risk countries or regions usually raise red flags with correspondent banks, requiring additional checks and verifications. Your remittance route should avoid transactions with high-risk countries or regions as much as possible. If unavoidable, you should prepare detailed transaction background and genuine proof documents in advance to demonstrate the legality and propriety of the transaction to the bank, ensuring smooth fund flow and transaction completion.

Unusual Account Background or Transaction History

If your account transaction history shows anomalies or suspicious records, the correspondent bank is likely to investigate further. To avoid such investigations, your account should maintain a good transaction record, ensuring every transaction is clear and legitimate. If the account is still investigated, it is best to communicate with the bank as soon as possible, providing the necessary explanations and proof documents to help the bank understand the real situation and resolve the investigation quickly.

Summary

The cross-border payment process is quite complex, with funds passing through multiple intermediary banks. A slight oversight can cause the remittance to get stuck, preventing it from reaching the recipient. Therefore, it is crucial to make thorough preparations and be ready to handle investigations when making cross-border payments. Alternatively, you can choose a professional remittance tool like BiyaPay, which supports local remittances in most countries or regions worldwide without involving intermediary banks. This results in faster transaction times, lower fees, and no remittance limits.

In conclusion, when making cross-border payments, you need to consider various factors, be aware of the associated risks and compliance issues, and choose the remittance method that best suits your needs.