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December 9, 2020

Q: What is an Intermediary Bank?

Intermediary banks or correspondent banks are used by some banks to transfer money between countries.


Compliance Ask Liquid Finance and Accounting Freelancer Management

An intermediary bank — or correspondent bank — is sometimes needed to complete international wire transfers. International wire transfers via the SWIFT network are typically how money is sent between banks in different countries. When the currency being sent does not match the currency used in the receiving bank account, an intermediary bank or correspondent bank is more likely to be needed to facilitate the transfer of funds.

How does an Intermediary Bank / Correspondent Bank work?

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To transfer money, banks must hold accounts with each other. Since there are too many banks for one bank to open accounts with every other bank, banks usually choose certain banks to open accounts. If a transfer is needed between banks that don’t have accounts open with each other, then the bank initiating the transfer must use an intermediary or correspondent bank to pass on the funds on their behalf. 

When an intermediary bank is required, payments will be transferred to the intermediary bank before being sent to its final destination bank account.  

Are Intermediary Banks and Correspondent Banks the same?

Intermediary banks and correspondent banks are both used by banks to facilitate the transfer of funds internationally. The difference between correspondent banks and intermediary banks depend on where in the world the receiving bank is located. In some cases, correspondent banks are different from intermediary banks; in other cases, correspondent banks are a type of intermediary bank and are essentially the same thing. 

In some countries, correspondent banks are used when handling transactions that involve a change in currency, while intermediary banks are used when handling a single currency. 

When does an Intermediary Bank / Correspondent Banks need to be used?

An intermediary bank or correspondent bank is used when the bank sending the money and the bank receiving the money need a middle man. The intermediary bank / correspondent bank acts on behalf of the sender bank. For example, you may need an intermediary bank or correspondent bank when:

  • Two banks in different countries don’t have an established relationship; or
  • The currency being sent from one country does not match the currency used in the receiving bank account in another country. 

Do I need to provide Intermediary Bank / Correspondent Banks info to Liquid?

While you must always enter the details about your bank account, including bank branch address and other information, the intermediary bank info is almost always optional. If an intermediary bank is required by the receiving bank to complete your payment, then your payment may be delayed or canceled if you have not entered that info into Liquid. We recommend that you check with your receiving local bank to ask if you need an intermediary bank. Here’s how to update your bank account to Get Paid in Liquid.

Secure 2-3 day payments to 175+ countries worldwide in USD and foreign currencies

US-based users of Liquid can send payments to 175+ countries worldwide in USD and in 40+ foreign currencies without having to ask for bank information from your vendors, contractors, and freelancers. In addition, vendors anywhere in the world can use Liquid to invoice Clients, even if those Clients are not users of Liquid. Invoicing can be done in USD or in foreign currencies, and Work Orders can be agreed to in USD or in foreign currencies. Liquid makes it easier to send and receive freelancer and vendor payments, anytime, anywhere.

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Category: Compliance Ask Liquid Finance and Accounting Freelancer Management

Updated: December 9, 2020

Quick note: This is not to be taken as tax advice or legal advice or payroll advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.

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