What is an F/B/O Account? FBO stands for “For Benefit Of.” It is a method on how money is kept by a Program Manager or a Bank but the account’s content, the funds inside of it, are meant for the bank.
Before you watch this video, you might want to know what a Program Manager is: What Does A Program Manager Do?
Hello. Have you ever wondered what an FBO account is? For benefit of? My name is Faisal Khan. I’m a banking and payment consultant and I will answer that today.
Typically, if you…in the United States it used to be that if you had an account it was FDIC insured. Federal Deposit Insurance Corporation. Right. It was FDIC insured for up to 100 thousand dollars.
So, anyone who had a checking or savings account, if you put money into it, the United States Government guaranteed the funds up to a hundred thousand dollars. But what if you have five hundred thousand dollars? Well, that’s where the banks came in and did something really cool. They made multiple accounts for you each for 100000 but each was called for the benefit of Faisal Khan, for the benefit of Faisal Khan, for the benefit of Faisal Khan times 5. So, we have 500,000 and that is what an FBO account originally was. So if you’re coming in with let’s say 50 million dollars they were divided by 100,000 and whatever number came in and they would go and open those accounts for you and all those accounts belong to you: the beneficiary.
In the money transfer world, in the payments world, if a program manager comes in and I’ve explained the program manager in a video below you can look at the comment section for it. If a program manager comes in and they have to open accounts for their clients, each account or sub account is…They’re all FBO accounts. Even my account with the bank is an FBO account…because it’s “For Benefit of Faisal Khan” it’s for benefit of Faisal Khan’s customer: John; it is for benefit of Faisal Khan’s customer: Mary and so forth.
So, an FBO account is meant for someone else being managed by a bank, on a program. In the money transfer world, the program could be…If you’re a program manager I want to have, you know, regulatory coverage and I’ll ask the bank to manage all the FBO accounts under me. There could be a single account, there could be an account with multiple sub accounts. These are just the small nuances but basically means: should we go into a legal dispute, should there be bankruptcy, should there be a bank that has been collapsing or what have you. When the FDIC will step in, they will say: OK, who do we owe the money to?
And in that case, it will say whatever the name on the FBO account will be, it is the person who will get the money. So if the account was in my name…they’ll get…I will get the money. If the account was in a client’s name, they will get the money. It is the legal settlement name on the FBO account is the person who gets the money. That is what an FBO account is. If you have any more questions or comments feel free to ask below, I will be happy to answer. Till next time, take care.
This page was last updated on December 10, 2019.