FBO Account (FBO)
An FBO account is a bank account held in one company’s name for the benefit of its underlying customers. The company controls the account; the money inside belongs to the customers. The bank’s relationship is with the account holder, not with them.
Also called: For Benefit Of account · for-the-benefit-of account
An FBO account is one bank account, opened in the name of an operating company, holding money that belongs to that company’s customers. FBO stands for “for benefit of”: the operator is the account holder of record, and the customers are the beneficial owners of what is inside it.
The bank generally sees a single balance and a single counterparty. Which customer owns which slice of that balance is recorded in the operator’s own sub-ledger, not in the bank’s books, so the quality of the operator’s reconciliation is what makes the structure trustworthy.
It is a United States banking structure. UK and EU safeguarding is a separate regulatory obligation with its own conditions about where customer funds may sit, how the account must be designated and what may be held in it. An FBO account does not automatically meet any of them.
In practice
An FBO account is a custody arrangement, not a permission. Holding customer money in one gives a firm no authority to transmit money and is no substitute for a money transmitter license or a FinCEN registration. Who owns the balance if the operator fails turns on the account agreement and the law that applies to it, not on the letters FBO.
Example
A payroll platform holds $4m in one FBO account at a US bank. The bank’s records show a single $4m balance and a single customer, the platform. The platform’s own ledger shows that the $4m is the sum of 1,200 employer balances. If the ledger and the bank balance ever disagree, only the platform can say which employer is affected.
Commonly confused with
| Term | How it differs |
|---|---|
| Named Account | An FBO account is in the operator’s name with customers as beneficiaries; a named account is opened in the customer’s own name at the bank. |
| Safeguarding Account | An FBO account is a US banking structure the operator chooses; a safeguarding account is a UK regulatory requirement whose conditions are set by the rules. |
| Omnibus Account | Omnibus describes the pooling of many customers into one balance; FBO describes whose benefit the account is held for. One account is often both. |
See also
- Omnibus AccountAn omnibus account is a single bank account holding the funds of many underlying customers together, with the operator keeping the sub-ledger that records who owns what. The bank deals with one account holder and sees one balance.
- Named AccountA named account is a bank account opened in the end customer’s own name rather than in the operator’s name with the customer recorded internally. The customer is the account holder of record, so money arriving there is identified with them at the bank.
- Safeguarding AccountA safeguarding account is the account at an eligible institution in which a UK payment or e-money firm places the customer funds it must safeguard, held and designated the way the applicable rules require rather than the way a bank chooses to label its product.
- Segregated AccountA segregated account holds customer money apart from the firm’s own money, so the two are never mixed and the customer balance is identifiable as customer balance in both the firm’s and the bank’s records.
- Pooled AccountA pooled account holds several customers’ money together in one bank account, with ownership of the individual balances tracked off the bank’s books in the firm’s own records. The bank knows the account holder and knows nothing of the customers inside.