Correspondent banking refers to a financial institution that conducts business transactions on behalf of another financial institution. It takes up roles like accepting deposits and gathering information on behalf of another financial institution. Correspondent banks are mostly used in foreign countries and they act as agents of the original bank.
There are several advantages to this arrangement:
1. 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.
2. We can process non-receipt 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.
3. 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.)
4. 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.
5. 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.
6. 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.
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