Here’s a clearer and more structured explanation of how a correspondent tie-up agreement works in the context of cross-border money transfers and Money Services Businesses (MSBs):
In the world of international money transfers, a common question is: Who is the payout partner and how do they operate? A payout partner in any country must be a licensed Money Services Business (MSB) or a money transfer operator. This applies whether you’re dealing with remittance, payment services, or banking services.
In the United States, for example, a licensed entity wishing to facilitate payouts in a specific country must have a correspondent tie-up agreement with a payout partner in that country. This agreement is essential because it ensures due diligence, contractual understanding, and compliance with regulations like anti-money laundering and counter-terrorism financing. Without such an agreement, funds cannot be transferred between the two entities.
There are three primary scenarios to consider:
- Existing Correspondent Tie-Up Agreements: If you are sponsored by a U.S. company, they might already have a correspondent tie-up agreement with a partner. This partner may or may not be suitable for your needs. If they are suitable, that’s great. If not, you have two options.
- Bringing Your Own Payout Partner: You can propose your own payout partner, especially if you find the current one unsatisfactory for reasons like reputation or rates. However, the sponsoring institution in the U.S. must be willing to enter into a correspondent tie-up with your proposed partner. This process can take weeks or months.
- Working with an MSP Suggested by the Sponsoring Institution: In many cases, the U.S. sponsoring institution already collaborates with a digital MSB, which might be licensed in the U.S. or another country. They may suggest that you form a correspondent tie-up with this MSB.
In summary, you have a few options when setting up a correspondent tie-up agreement for cross-border money transfers:
- Accept the existing arrangement between the sponsoring institution and their established payout partner.
- Suggest a different payout partner to the sponsoring institution, which they may or may not accept.
- Work with an MSB suggested by the sponsoring institution and form a correspondent tie-up with them.
This explanation should help clarify the process and options available for establishing a correspondent tie-up agreement with a payout partner in your chosen country.
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This page was last updated on December 13, 2023.
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