Beneficiary Bank
The beneficiary bank is the financial institution that holds the account intended to receive a payment. It may review the beneficiary, currency, payment purpose and supporting documents before making funds available.
The beneficiary bank is the last institution in the chain, and it has its own obligations. Before crediting a cross-border payment it typically checks that the account name matches the beneficiary named in the payment, that the account can receive the currency sent, and that the payment purpose fits the account holder's business. In Mainland China it also applies the foreign-exchange documentation rules for inbound payments.
Problems at this stage are a frequent cause of delayed and returned payments. A name mismatch, an account that only accepts renminbi when US dollars were sent, or a missing invoice reference can all lead the bank to hold the funds, ask the beneficiary for documents, or send the payment back through the intermediary chain. The beneficiary bank may also deduct its own charge for processing the inbound transfer.
Payers should obtain the beneficiary bank details in writing from a verified source, confirm which currencies the account accepts, and make sure the account holder is the party that issued the invoice. When a supplier's bank details change unexpectedly, that is a reason to verify independently before paying; see payment diversion fraud. The supplier payment guide covers the details to collect.
In practice
The sender's bank confirming that a payment was sent does not mean the beneficiary bank has credited it. Funds can sit under review at the beneficiary bank after they have left every other institution in the chain.
Commonly confused with
| Term | How it differs |
|---|---|
| Intermediary Bank | An intermediary bank passes the payment along between banks that lack a direct relationship. The beneficiary bank holds the destination account and decides whether to credit it. |
See also
- Intermediary BankAn intermediary bank sits between the sending bank and beneficiary bank when they lack a direct settlement relationship. It may process, screen, convert or deduct charges from the payment as it passes through the correspondent chain.
- Correspondent BankingCorrespondent banking is an arrangement in which one bank holds deposits for another bank and makes and receives payments on its behalf, normally so the second bank can reach a currency or a market where it has no branch or license of its own.
- Beneficiary-Account MismatchA beneficiary-account mismatch occurs when the account holder’s name does not agree with the expected supplier or contractual payee. It can indicate a clerical error, undisclosed collection arrangement, payment-diversion fraud or an unrelated third party.
- Payment-Purpose CodeA payment-purpose code identifies the commercial or regulatory reason for a transfer, such as payment for goods or services. Using an inaccurate code can cause delays, rejection, reporting problems or inconsistencies with the supporting documents.