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Opening a correspondent account offers a number of advantages when you want to establish an offshore banking entity or to make international transfers. With it you will be able to make transfers in multiple currencies and establish international financial alliances.
The banking sector is still facing problems that do not seem to correspond to this modern age of technological advances.
Even in 2022 there are still financial institutions that take six months to open a bank account, they do not carry out transactions in different currencies, their web portals are obsolete and they do not have apps for mobile access, not to mention that you still have to go to a physical bank to carry out any transaction.
At Mundo we are aware of this context and we want to offer you a quick access solution that can solve your needs when managing your assets: correspondence banking services.
What is a correspondent bank?
When we talk about a correspondent bank, we refer to a financial entity that offers services to another one, in a different location. The correspondent bank functions as an intermediary, performing wire transfers, trade transactions, receiving deposits and documents on behalf of another bank.
Correspondent banks are generally used by domestic banks to access transactions originating in a foreign country. In this way, domestic banks access these types of services to gain access to foreign financial markets and establish alliances with clients outside of their main location or headquarters.
How a correspondent bank works?
Correspondent banks, to put it more simply, are third party banks. Their role is to be an intermediary between financial institutions. Their services range from being the treasury between the sending and receiving banks, especially those located in different countries, such as:
- Transfer of funds
- Check clearing
- Wire transfers
- Currency exchange
On the other hand, these types of banks also function as agents to process local transactions for clients who are traveling abroad. Locally, they are correspondents that accept deposits, process documentation related to a financial alliance and serve as fund transfer agents.
What is a correspondent account?
The type of account that correspondent banks and the banks they service are defined as Nostro and Vostro accounts.
Nostro means “our account” for the correspondent bank and Vostro means “our account” for the servicing bank.
Generally, both banks in establishing a correspondent relationship maintain accounts for each other in order to keep track of debits and credits between the parties.
Correspondent accounts are a fundamental part of the financial industry, providing a channel for domestic banks to operate in a foreign country when it is not possible or feasible to open a bank branch there.
For example, a small domestic bank with clients in different countries can establish an alliance with a correspondent bank in order to meet the needs and solve the problems of its clients at an international level. The correspondent bank will charge a fee to the domestic bank on the customer account.
How correspondent accounts work?
International transfers are executed through the SWIFT system. If there is no banking alliance between the bank that issues the funds transfer and the bank that will receive the funds, the originating bank can consult the SWIFT network for a correspondent bank that has agreements with both banks. If there is a correspondent bank that has a working relationship with both parties to the transfer, the originating bank sends the transferred funds to its Nostro account at the correspondent bank.
Who can use a correspondent account?
Correspondent accounts are designed for those who need to conduct international transactions in multiple currencies. On the other hand, there are those who when establishing an international or offshore bank will need a correspondent account to be able to conduct international transactions.
Correspondent bank vs. intermediary bank
There are certain similarities between correspondent banks and intermediary banks, which in some cases may cause confusion. But there is an important difference between the two. While a correspondent bank handles multi-currency transactions, an intermediary bank only makes
transfers in a single currency. This difference and advantage is important, especially for local banks that are too small to handle such transactions.
- Bank Account provided by U.S Bank
- FDIC insured funds (upto $250,000)
- Digital account opening; no physical presence required
- Connect to U.S payment rails: ACH and Fedwire
- Receive and pay to countries around the world via SWIFT
- Transfer and pay into 140 currencies
- Receive stablecoins (USDC and USDT)
- Buy, Sell and Hold Cryptocurrencies
- 24/7 support service
Account Opening Requirements
The necessary documents to open your bank account include:
- Certificate of incorporation
- Document specifying the board of directors and beneficial owners.
- KYC package, identity documents and proof of address for the entire board of directors and beneficial owners. All documents must be no more than 3 months old.
- Address of the company's domicile.
In order to protect customers' assets, our banking partner has insurance offered by the FDIC (Federal Deposit Insurance Corp), which is a U.S. government agency in charge of insuring bank deposits in case of bankruptcy of any financial institution.
This insurance has a coverage of 250 thousand U.S. dollars. However, in the event of a bank failure, the agency will take care of covering the amounts deposited by the clients and will cover the loss within the established limits.
How long does it take to open an account?
Bank account opening can take less than 2 days. However, it may take 6 to 8 days to complete all the security protocols and review the required documentation.
Can I open direct accounts for my account holders?
Yes, your account holders can create their own accounts with the partner bank.
Which jurisdictions cannot participate in the account opening?
In case you are a citizen of the following countries, you will not be able to open an account with our partner:
- North Korea
*A Director or UBO may be a national (passport holder) of one of the prohibited countries, but a proof of address outside of the prohibited country is required.
If you are a national of a country that is not on the list, you may open an account.
How can we help you?
Mundo's banking experts have been in the industry since 2003, and can help you open correspondent accounts for your offshore bank or licensed international bank in a quality jurisdiction.
The services we offer, through our partners, are the most modern and secure in the market. We take care to comply with all banking security standards to avoid the financing of illicit activities or activities that may put our partners' assets at risk.
That is why we work with jurisdictions that have strong regulatory frameworks and institutions that offer legal security when doing business. An example of this is Puerto Rico or the Cayman Islands, among many others.
Let us be your liaison when opening your bank account. Our tax, legal, accounting and management advisors are at your service to provide you with a comfortable and reliable experience.
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