The pandemic, globalisation processes and growing remote work opportunities have increased the demand for online products and services, both for individuals and businesses. In the finance sphere payment service providers (PSPs) turned out to be a great alternative to traditional banking. Their products are usually described as operational, tailored and technological. However, is it actually true? SPS Legal experts explained what features you should always pay attention to when working with any PSP.
1. Know your sending bank
The sending bank is a credit organisation that is a member of an international transfer system such as, for example, SWIFT. The client of the sending bank is called the transaction sender, and the transfer funds are debited from their correspondent account.
The sending bank is the main communication channel for your payment. In case of any issue, it will be this financial organisation that will require additional information from you in order to send it to other financial intermediaries in the transaction.
2. Know the correspondent bank of your PSP
Each payment service has its own correspondent bank (or even a number of correspondent banks) that it always works with. Thus, in order to carry out a SWIFT transfer in a foreign currency, the sending bank must have an account in a foreign credit institution. This would be a correspondent bank that executes payment orders for other banks. Sometimes several intermediary banks are part of the transfer. Nevertheless, the common rule is: the fewer correspondent banks participate in the transaction, the faster and cheaper it will be.
Therefore, it is vital to know which correspondent bank works with your PSP. It is also important to understand that the sending bank of the transfer cannot be responsible for decisions taken by the correspondent bank.
3. Keep your PSP account balance positive
Important to mention: it is not required, yet highly recommended. Having enough funds available on your PSP account can significantly reduce the risk of payment delays. Let us explain: delays tend to occur when the correspondent bank has doubts about the origin of the client’s money. If doubts do arise, the transfer might be delayed for up to six months. SPS Legal experts do their best to minimise the risks by executing their own compliance procedure. Despite their professionalism and vast experience, transfer delays might happen to anyone. Another thing that can affect the speed of payments is the account balance, as the correspondent banks usually closely monitor the client’s activity history. Thus, a credit institution will certainly have its doubts about a client that deposits money on their account and spends it all the next day. On the other hand, an account that always has a positive balance is a green flag for the bank, as it gives an impression of certain stability and reliability of the funds holder. Therefore, the bank has fewer questions and payments are usually carried out exactly on time. Of course, it does not mean you need to always have a big amount available on your account (for some PSPs this is a paid service), but it is important to know about this recommendation.
4. Use the GPI tracker of your transaction
The GPI tracker was developed by the SWIFT system. This tracker allows you to check the transfer status in real time. You can see all the stages of your transaction after the money was sent from the PSP account. If you want to see the current status of your transfer you can ask your PSP support system to check it with the GPI tracker.
You can also do it yourself on several online platforms. You should always make sure the service is reliable and trustworthy so as not to pass unnecessary information to scammers. You will need your unique end-to-end transaction reference (commonly known as UETR) which can be requested at the sending bank or PSP. Its format is always the same: XXXXXXXX-XXXX-XXXX-XXXX-XXXXXXXXXXXX.
The GPI tracker significantly increases the transparency of international payments. It helps the participants to see which of the parties bears the transaction costs, so that they can easily figure out why the transfer arrived late or some fee was withdrawn.
5. Send ‘clean’ money
At any stage of the transaction a foreign bank might request additional information about the origin of funds as part of its anti-money laundering control procedures.
Foreign banks are heavily pressured by the largest international regulators and supervisors (such FATF and OECD) and, therefore, they are obliged to introduce strict procedures for their compliance teams. These teams make sure that their clients’ funds comply with all the requirements of international banking legislation (the most popular policy is called KYC (know your client) policy. All banking organisations try not to deal with money coming from the ‘grey’ zone, as this might create an interest from the licensing authority, which can lead to an investigation and even to the licence revocation.
Moreover, banks are especially cautious in the era of sanctions. Governments and organisations adopt sanctions so quickly that financial institutions barely keep up with the new laws and regulations. Unfortunately, it is easier for banks not to analyse possible risks, but to preventively refuse to serve some categories of customers.
These risks can be minimised. In order to do that, when carrying out a payment, you need to provide the most complete set of documents to your PSP. Having all the necessary papers, the bank will have enough evidence of the purity of your funds and will make sure your transfer is safe and sound.