TN 52 (04-14)
GN 02402.120 Correspondent Banking
A. Introduction to correspondent banking
Any beneficiary living outside the country may have direct deposit to a U.S. financial institution (FI) or to an FI in any International Direct Deposit (IDD) country. In the past, a number of beneficiaries made individual arrangements with a U.S. FI to transfer funds each month to an FI in their country of residence. Correspondent banking occurs when a U.S. FI sets up an arrangement with a partner FI in another country for this purpose.
B. Process for correspondent banking
1. Solicitation for correspondent banking
The U.S. FI asks the partner FI to solicit direct deposit by sending letters to its customers who receive U.S. Government payments. Sometimes, the embassy or consulate general assists all participating FIs in the area by notifying the beneficiaries of this possibility.
2. Enrolling in correspondent banking
The beneficiary (or rep payee) applies through the partner FI in the country where he or she banks. The partner FI sends the information to the U.S. FI for direct input to:
the Master Beneficiary Record (MBR) through Automated Enrollment; or
the Federal Benefits Unit or Office of Earnings and International Operations (OEIO) to key the information to the MBR.
NOTE: If domestic (i.e., non-boarder) field offices receive this information, forward to OEIO.
The direct deposit information on the MBR looks as if the payments stay at the U.S. FI.
3. Payment process through correspondent banking
We deliver the payment to the account at the U.S. FI. We have completed our responsibilities when the payment has gone to the account at the U.S. FI that the beneficiary requested. The U.S. FI then transfers the payment to the foreign FI, and the foreign FI posts the payment to the beneficiary’s account at that FI.
C. Advantages of correspondent banking
There are several advantages to this arrangement:
We can do any necessary reclamation through the U.S. Treasury as normal. The U.S. FI is responsible for reclaiming the payments. The Payment History Update Screen (PHUS) record shows the reclamation request and response. This differs from IDD reclamations, which require manual actions. (For information about IDD reclamations, see GN 02408.900 through GN 02408.950.)
We can process nonreceipt actions through normal input. Treasury then processes them. PHUS displays the nonreceipt request and Treasury’s response. This differs from IDD nonreceipt reports, which require manual actions, for information see, Allegations of Nonreceipt of International Direct Deposit GN 02402.250.
The financial institution’s routing number is available on the Routing Transit Number Database (RTND) screen. (For the RTND data entry screen, see MSOM QUERIES 005.005.)
The U.S. FI can send a Notice of Change (NOC) directly to us if the direct deposit information changes because of an FI merger or FI systems update.
In areas where IDD is not available, correspondent banking gives the beneficiary a way to avoid the problems with check delivery by choosing direct deposit.
Unlike IDD, this arrangement is available to a beneficiary residing in the U.S. who wants to deposit his or her benefits in an FI outside the U.S.
D. Disadvantages of correspondent banking
There are several disadvantages to this arrangement:
Depending on the FI’s involvement, the MBR may not show a record regarding the account the payment goes to after it reaches the U.S. FI.
Our agency, the Federal Reserve Bank, and Treasury have no control over the amount charged by the U.S. FI to forward the payment or the foreign FI to receive it. The FIs may deduct any charges from the payment.
The payment is usually in U.S. dollars upon receipt, so the foreign FI may charge to convert the payment to the local currency. With IDD in most countries, the payment arrives in local currency. The only exception is when the Federal Benefits Officer in a region notifies us that a majority of the beneficiaries would prefer IDD in U.S. dollars.
NOTE: Currency conversion charges may apply
The consular office does not usually receive a list of payments through correspondent banking, which it does with IDD or paper checks.