International Payments & Cross-Border Transactions Flashcards
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Read the first 7 International Payments & Cross-Border Transactions flashcards as text
Which messaging network is the primary standard used for transmitting international payment instructions between financial institutions?
Answer: SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is the global standard messaging network used by financial institutions to securely transmit international payment instructions.
What does a SWIFT BIC code primarily identify?
Answer: A specific financial institution and its location
A SWIFT BIC (Bank Identifier Code) uniquely identifies a specific financial institution and its country, city, and branch, enabling accurate routing of international payments.
In a cross-border wire transfer, what is the role of a correspondent bank?
Answer: It acts as an intermediary to facilitate payments between banks that have no direct relationship
A correspondent bank acts as an intermediary financial institution that facilitates transactions between banks in different countries that do not have direct banking relationships with each other.
Which international regulatory framework is designed to combat money laundering and terrorist financing in cross-border payments?
Answer: FATF Recommendations
The Financial Action Task Force (FATF) Recommendations are the globally recognized framework that establishes anti-money laundering (AML) and counter-terrorist financing (CTF) standards for cross-border transactions.
What is the primary purpose of OFAC screening in international payment processing?
Answer: To ensure transactions do not involve sanctioned individuals, entities, or countries
OFAC (Office of Foreign Assets Control) screening ensures that international payments do not involve parties or countries subject to U.S. economic sanctions, which is a legal compliance requirement.
Which SWIFT message type is most commonly used for customer credit transfers in international payments?
Answer: MT 103
The MT 103 is the standard SWIFT message type used for single customer credit transfers, making it the most common message for international wire payments sent on behalf of customers.
What is foreign exchange (FX) risk in the context of cross-border payments?
Answer: The risk that currency exchange rate fluctuations will affect the value of a cross-border transaction
FX risk refers to the potential for adverse currency exchange rate movements between the time a cross-border payment is initiated and when it is settled, which can affect the actual value received.