Post by Sapphire Capital on Jul 12, 2008 2:41:53 GMT 4
Using Nostro accounts can be a good idea but you have to have some understanding about the mechanics and the concerns.
In a usual wire transfer between countries, lets say from Rohel Commercial Bank to an account in Bank of America Charlote USA, the communication would be a SWIFT message from Rohel to BoA and a Swift message with a wire transfer instruction from Rohel to HSBC USA NYC acc 000140813 or to Citibank NYC acc 36264611 to transfer amount XYZ to BoA, which then would either be booked into the Notro account of BoA with any of both of them or more likely transferred by Fedwire.
This is very common and nothing special at all. However Rohel Bank is an African Bank sodepending on their limits and available funding a red flag could be placed if the recipient is not known for doing business in Africa, the amount is unusual and what other details may show up, or just for the fun orf it because the money comes from Africa (remember they are not racists in the US, just careful minding past experience....so they say)
These Nostro accounts of Rohe are used for cash management and performing foreign currency remittance, meaning if you go and put money into them, you mayscrew them up.
Therefore if you for example would be in the US and want to send money to Rohel overseas and want to avoid the international bank wire transfer charges, you could wire to the respective account in Citibank or HSBC, or even direct deposit in them and they would show up in Rohels account and would be booked if they know where it is coming from and to whom it belongs.
For a low amount they will not mind, but if you go and put 100 M USD into the account you will blow them out of the water, cause all kind of havoc and probably get them to open a new account because they will loose theirs. The reason for this is that within reason Nostro accounts follow the same rules and regulations in regards of SAR (Suspicious Activity Reports) as normal accounts and are monitored, because of the argument of money laundering activities via correspondent banking (conveniently forgetting that the biggest laundering operation is NY and not through correspondent accounts).
This is the reason Rohel will call you up when wiring through their Nostro account in the US to them and tell you not to do so without talking to them first.
This however changes when you deal with money center banks or well established entities, and wonder over wonder a couple of 100 M USD are no problem at all, its all volume.
Lets say you have an account in Chinese Overseas Bank Singapore and want to quietly move some Euro's to that account very well knowing that an international wire will stand out because you are doing that many, so you wire to Rabo Bank NL acc 390802832EUR for Chinese Overseas Bank for further credit to acc: XYZ and it will be there fast no questions asked. It is however advisable to talk to them when you deal in 100M and higher because they may have better accounts and include them in the liquidity planning. Rabo Bank will not redflag the account because it has numerous similar transfers in and out.
You can play the game to the excess, wiring with subreferences over subreferences routing money through the system without ever touching SWIFT and its notification mechanism, however you have to keep in line, apply common sense and there can be national data evaluation and registration. In some countries it is the only way to do international business because the Central Bank looks at all international wire operations.
If you overdo you will get into trouble and beware only use banks which have the volume and the local standing.
And by the way, sending mesages through Nostro accounts is not the way to go if such messages do not follow effective booking and the expenses can be murderous because on message transfers there is no cap like there is on wire transfers and abusers often find themselves in deep waters.
In a usual wire transfer between countries, lets say from Rohel Commercial Bank to an account in Bank of America Charlote USA, the communication would be a SWIFT message from Rohel to BoA and a Swift message with a wire transfer instruction from Rohel to HSBC USA NYC acc 000140813 or to Citibank NYC acc 36264611 to transfer amount XYZ to BoA, which then would either be booked into the Notro account of BoA with any of both of them or more likely transferred by Fedwire.
This is very common and nothing special at all. However Rohel Bank is an African Bank sodepending on their limits and available funding a red flag could be placed if the recipient is not known for doing business in Africa, the amount is unusual and what other details may show up, or just for the fun orf it because the money comes from Africa (remember they are not racists in the US, just careful minding past experience....so they say)
These Nostro accounts of Rohe are used for cash management and performing foreign currency remittance, meaning if you go and put money into them, you mayscrew them up.
Therefore if you for example would be in the US and want to send money to Rohel overseas and want to avoid the international bank wire transfer charges, you could wire to the respective account in Citibank or HSBC, or even direct deposit in them and they would show up in Rohels account and would be booked if they know where it is coming from and to whom it belongs.
For a low amount they will not mind, but if you go and put 100 M USD into the account you will blow them out of the water, cause all kind of havoc and probably get them to open a new account because they will loose theirs. The reason for this is that within reason Nostro accounts follow the same rules and regulations in regards of SAR (Suspicious Activity Reports) as normal accounts and are monitored, because of the argument of money laundering activities via correspondent banking (conveniently forgetting that the biggest laundering operation is NY and not through correspondent accounts).
This is the reason Rohel will call you up when wiring through their Nostro account in the US to them and tell you not to do so without talking to them first.
This however changes when you deal with money center banks or well established entities, and wonder over wonder a couple of 100 M USD are no problem at all, its all volume.
Lets say you have an account in Chinese Overseas Bank Singapore and want to quietly move some Euro's to that account very well knowing that an international wire will stand out because you are doing that many, so you wire to Rabo Bank NL acc 390802832EUR for Chinese Overseas Bank for further credit to acc: XYZ and it will be there fast no questions asked. It is however advisable to talk to them when you deal in 100M and higher because they may have better accounts and include them in the liquidity planning. Rabo Bank will not redflag the account because it has numerous similar transfers in and out.
You can play the game to the excess, wiring with subreferences over subreferences routing money through the system without ever touching SWIFT and its notification mechanism, however you have to keep in line, apply common sense and there can be national data evaluation and registration. In some countries it is the only way to do international business because the Central Bank looks at all international wire operations.
If you overdo you will get into trouble and beware only use banks which have the volume and the local standing.
And by the way, sending mesages through Nostro accounts is not the way to go if such messages do not follow effective booking and the expenses can be murderous because on message transfers there is no cap like there is on wire transfers and abusers often find themselves in deep waters.