Intermediary Financial Institution/Correspondent Financial Institution

Is a Financial Institution which provides services on behalf of another, equal or unequal Financial Institution. It can facilitate financial activities on behalf of another Financial Institution. 

How does Intermediary Financial Institution work?

Intermediary Financial Institutions are most commonly used by domestic Banks in cases of foreign or foreign originating Transactions. They are mostly employed in instances where Financial Institutions are located abroad and do not have direct access to the national market. More specifically they are engaged when two Financial Institutions conducting business together do not have a direct relationship. In such instances, Intermediary Financial Institution acts as a facilitator of Transfer. 

As well, Intermediary Financial Institution can be any entity (e.g. Payment Service Provider or Automated Clearing House) that has contractual agreements with one or more Direct and Indirect Participants in the financial system.

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