Glossary term
Wire Transfer
Subject: Financial Crime, AML/CFT Framework and Standards
Also known as: Electronic funds transfer, Bank transfer
A wire transfer is an electronic payment sent through a bank or payment institution, on behalf of a sender, so that money becomes available to a beneficiary at another institution, in the same country or abroad.
Explanation
Despite the name, no wire moves any cash. The sending bank debits the payer, sends a message through a network such as SWIFT or a domestic payment system, and the money is settled between banks, sometimes via one or more intermediaries or correspondent accounts. The final bank credits the beneficiary. Wire transfers are fast and can cross borders in hours, which suits legitimate trade and also attracts criminals who want to move funds quickly or break a money trail. Because of this, FATF expects the originator and beneficiary details to travel with each transfer, and banks screen the messages against sanctions lists and monitor patterns. Cover payments, where details are held back from intermediaries, have attracted regulator attention. Practitioners meet wire transfers in nearly every payment-related rule. Much cross-border money movement, and much cross-border financial crime, runs through this channel.
Example
A hospital pays an overseas supplier for imaging equipment. Its bank sends a payment message with the hospital's name and account and the supplier's name and account. An intermediary bank in a third country screens the parties against sanctions lists, finds no match, and passes the message to the supplier's bank, which credits the account the next day.
Not to be confused with
- Cheque or card payment
- Those work differently: the payee collects the money. In a wire transfer the payer's bank pushes it to the beneficiary.