International Bank Transfers | 5 Things You Must Know

Paying by International Bank Transfer is Safe & Quick. There are Things you Need to Know.

How often has it happened to you that you made an international payment for a sailing trip only to find out later that not all of your payment was received?

Or suddenly at the end of the month, you see some unknown charges on your bank statement?

It makes you think about what went wrong. You know what the banking charges are, so it must be the fault of the receiving Sailing Charter Company’s bank. Perhaps the receiving bank has expensive charges, or they just thought that you wouldn’t notice it. But you noticed and now you’re wondering.

It is our role as Sailing Charter Agent to improve the process, help clients understand the process better, add value, allowing them to make better decisions.

International Bank Transfers

What is an International Bank Transfer?

International bank transfer is an electronic means of sending money to another person or company. This is a very common transaction with all banks, however, this method is difficult to execute and cost more.

International wire transfers are frequently managed through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. This network helps small banks find a correspondent or intermediary banks that will facilitate the transfer.

Parties involved

Issuer Bank

This is the financial institution that holds the funds of the customer. It is responsible for the execution of the international bank transfer.

Correspondent and Intermediary Banks
Correspondent Banks

A correspondent bank is a financial institution that provides services on behalf of another bank, it serves as an agent between the issuing bank and the receiving bank.

The correspondent bank can perform various transactions on behalf of the issuing bank. These include execution of wire transfers, receiving deposits, carrying out as transfer agents, and coordinating documents for another financial institution.

Intermediary Banks

An intermediary bank performs a similar function as a correspondent bank. It also serves as an agent between the issuing bank and a receiving bank, most commonly in different countries.

An intermediary bank is usually used when international wire transfers are made between two financial institutions such as banks in different countries that don’t have any set financial arrangements.

Correspondent and intermediary banks both function as a third-party financial institution that coordinates with the receiving banks to facilitate international fund transfers.

A person or company with an account in an issuing bank will then use a correspondent or intermediary bank to facilitate the transfer of funds to the receiving bank.

Recipient Bank

This is the financial institution that will receive the funds transferred by the customer. It is responsible for the acceptance of international bank transfer.


Issuing Bank’s Transfer Fees

This is often the charge the issuing bank presents in the transfer confirmation. It’s clearly outlined, with minimum variation presented at a reasonable cost.

Intermediary Bank Fees

This is a flat fee charged by the intermediary bank used by the issuer bank in the absence of financial arrangements with the receiving bank.

Depending on the international presence of the issuing bank, this fee could come from up to three intermediary banks having different flat fees.

Foreign Exchange Rate Markups

This cost usually incurs from the receiving bank. However if there are several intermediary banks involved, often one of them will do the exchange.

Nevertheless, whoever makes the exchange will not use the middle market rate.

The current rate used by the banks involved could be easily searched, however, this is another cost that adds up to the facilitation of international bank transfer.

Receiving Bank’s Fees

This is the fee charged by the receiving bank as counterpart fee for accepting the international bank transfer.

SWIFT Network

The most common way to do international bank transfer is through SWIFT System(Society for Worldwide Interbank Financial Telecommunication).

If there is no financial arrangement between the issuing and receiving bank, the issuing bank can look in the SWIFT network for a correspondent or intermediary bank that has a connection with both financial institutions.

There are three expense regulation methods offered by this network:

OUR (Sender pays all fees)

This instruction means the sender will pay all the transfer fees and the receiver receives the payment in full. This is the most common arrangement the suppliers of goods and services such as yacht charter agents or operators prefer.

SHA (Shared fees)

This instruction means the sender will only pay the issuing bank’s transfer fees and the receiver receives the payment less the costs from the receiving bank’s fee and all the charges from the intermediary bank.

BEN (Recipient pays all fees)

This instruction is the opposite of OUR. The recipient receives the payment less all transfer fees.

Intermediary Bank Fees - A hidden fee?

The size of the banks and their international connections affect the way they execute their services.

Depending on what way the payment takes and the connection between the correspondent banks, an intermediary bank and/or the receiving bank may charge a fee from the amount transferred, prior to posting of funds to the receiving account. This fee can vary in amount and cannot be easily predicted whether it will occur or, if it does, how much will be charged.

It is a common practice for banks not to inform their clients before using an intermediary bank. And an intermediary bank can charge any rate they please without the need to ask first for the sender’s permission.

Therefore, before making any international bank transfer, be sure to ask your bank the following questions:

  • Does the issuer bank have a direct financial arrangement with the receiving bank?
  • If the international bank transfer is in a different currency, what will be the foreign exchange rate?
  • How much is the charge for facilitating the transfer?

The issuing bank will not be able to tell the charges from the receiving bank, but they will be able to show theirs and inform you if they need to use an intermediary bank.

As we head to globalisation, conducting business gets more complicated and requires knowledge of how we do international transactions.

Banks are businesses and they will operate with an aim for profit. With that in mind, we have to be curious and remember that lack of knowledge has a price.

Let us know your experiences in the comments below.

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