top of page
  • Epico Finance

Opening Correspondent Bank Account PSP

Correspondent banking refers to a relationship established between two financial institutions, where one provides services on behalf of the other. This arrangement is particularly beneficial for PSPs that need to access financial services in jurisdictions where they do not have a physical presence. By partnering with correspondent banks, PSPs can offer a wider range of services, including cross-border payments, currency exchange, and settlement of transactions.




Why PSPs Need Correspondent Relationships?


For PSPs, a correspondent banking relationship is not just a convenience; it's a strategic asset. It facilitates international money transfers, supports the expansion into new industry verticals by having ability to send payments to more destinations, and enhances the efficiency of payment processing by lowering costs. Moreover, it plays a pivotal role in maintaining liquidity, managing risks, and ensuring compliance with global regulatory standards.


In the similar vein, expanding the network of correspondent partners adds not only the payment rails but also additional currencies that then can be monetized by the PSPs once their clients wish to exchange and send money abroad. Adding more currencies to the offering often create revenue opportunities that can make a significant difference to the bottom line.



Steps To Opening A Correspondent Bank Account


1. Due Diligence and Selection: The first step involves thorough research to identify potential correspondent banks that align with the PSP's business model, values, and requirements. This stage includes assessing the correspondent bank's reputation, regulatory compliance and license, network coverage, and the quality of its services. Moreover, the commercials are equally important as they can create or destroy profit potential for the PSP. Make sure you have a defined list of potential correspondent banks and clear vision for viable commercials. If you would like to get an up to date list of PSP friendly banks, fill out our contact form and we will send it to you by email.


2. Compliance and Documentation: PSPs must prepare and submit a comprehensive package of documents that will be carefully analyzed and questioned by the banks compliance department. This stage is critical as many PSPs often fail to successfully onboard with many correspondent banks. We have compiled a list of most common documents required to initiate the onboard so that you can prepare in advance:



1. Corporate Identity Verification:

   - Certificate of Registration or Incorporation.

   - Memorandum and Articles of Association, or Articles of Incorporation.


2. Operational And Governance Details:

   - Comprehensive list of directors and shareholders.

   - Identification documents for all Ultimate Beneficial Owners (UBOs) and authorized signatories.


3. Operational Proof And Licencing:

   - Verification of the business address, website, description of business operation.

   - License number, confirming regulatory supervision and legitimacy.


4. Financial Transparency:

   - Latest Audited Accounts or a recent business bank statement to demonstrate financial health.


5. Compliance And Risk Management:

   - Detailed Anti-Money Laundering (AML), Know Your Customer (KYC), and Customer Due Diligence (CDD) policies.

   - The most recent external AML audit report, if not available currently, might be asked to be done once account is approved.

   - Management information including AML governance arrangements, a sampling of CDD files, and customer risk assessment data.

   - Evidence of an external AML audit, typically required on an annual basis to maintain compliance integrity.


3. Negotiation: Once the preliminary approval is received, the PSP and the correspondent bank negotiate the terms of the agreement. This includes fees, transaction limits, currencies supported, and settlement times.


4. Integration And Testing: After the agreement is signed, technical integration begins. PSPs need to ensure their systems are compatible with the correspondent bank’s, facilitating smooth transaction processing. This phase often involves rigorous testing to guarantee operational efficiency and security.


5. Ongoing Monitoring And Compliance: Establishing the account is not the end. PSPs must continuously monitor transactions, perform regular audits, and ensure compliance with evolving regulatory standards to maintain the correspondent banking relationship.



Last Thoughts


While correspondent banking offers numerous advantages, it also comes with its set of challenges. Regulatory compliance is at the forefront, requiring PSPs to have robust systems and processes in place to detect and prevent financial crimes. The cost of compliance and the operational requirements can be substantial, necessitating a careful assessment of the benefits versus the costs.


Additionally, the choice of a correspondent bank can significantly impact the PSP's ability to offer competitive services. Factors such as the speed of transactions, the range of currencies, and the geographic coverage should be carefully evaluated.





Opening a correspondent bank account is a strategic step for Payment Service Providers looking to scale their operations and enhance their service offerings. Despite the complexities and regulatory challenges involved, the benefits in terms of expanded market access, improved operational efficiency, and enhanced competitiveness are substantial.


11 views0 comments

WHATSAPP +370 655 75558

Contact Us


© 2024 by EpicoFinance.

bottom of page