How can I legally build a multi-currency NS/RTGS system based on banks’ current accounts?
Banking
Asked by Question Bot06/Apr/20151 answer
1 Answer
F
Faisal Khan
Answered 06/Apr/2015
You've asked a couple of questions, so here are your answers:
This relationship is perfectly legal (from a banking point of view only). This would come under the purview of corporate banking or cash & transaction management functions within the bank. Regular banking would not be applicable here because of the number of sub-accounts involved.
Building an RTGS system could be subjected to regulatory approvals. It definitely puts a liability and risk strain on the banks, so even though you might be approved by the regulator, the banks may deny you their banking facilities/platform.
In order to on-board and off-board clients in any country, you would need to be regulated. For example even if you are using banks, you would need a money transmitter license (sorry if that is something you did not want to hear).
On the risk front, because you would be a money transmitter and are exhibiting the functionality of a cross-border money transmitter along with a settlement provider, in UK and (especially) in the US, you are deemed high-risk. You would have a tough time finding a bank to work with.
Regardless of the fact that you are taking the risk, the currency and flight capital risk is still in play, and banks could be held equally liable by the regulators. In particular your capability to have adequate AML and KYC controls in your transaction management system (TMS) is something that would be scrutinized in depth and in very fine detail.
Even though you are bunching transactions together, you could be subjected to the bank's risk & compliance department to have in-depth over view and audit of your AML/KYC in your TMS. If they are not satisfied, they can deny you banking privileges.
You would also need to show the segregation of pooled accounts vs Nostro/Vostro accounts, vs in-transaction accounts, etc.
On a technology stack-wise you would need a treasury (FX) system along with a micro-core banking software that hopefully can pool information in real-time from the bank's core-banking system (most likely they will provide you with OFX data streams for account reconciliation) as well as a corporate banking terminal access (which might have an API to connect to).
This relationship is perfectly legal (from a banking point of view only). This would come under the purview of corporate banking or cash & transaction management functions within the bank. Regular banking would not be applicable here because of the number of sub-accounts involved.
Building an RTGS system could be subjected to regulatory approvals. It definitely puts a liability and risk strain on the banks, so even though you might be approved by the regulator, the banks may deny you their banking facilities/platform.
In order to on-board and off-board clients in any country, you would need to be regulated. For example even if you are using banks, you would need a money transmitter license (sorry if that is something you did not want to hear).
On the risk front, because you would be a money transmitter and are exhibiting the functionality of a cross-border money transmitter along with a settlement provider, in UK and (especially) in the US, you are deemed high-risk. You would have a tough time finding a bank to work with.
Regardless of the fact that you are taking the risk, the currency and flight capital risk is still in play, and banks could be held equally liable by the regulators. In particular your capability to have adequate AML and KYC controls in your transaction management system (TMS) is something that would be scrutinized in depth and in very fine detail.
Even though you are bunching transactions together, you could be subjected to the bank's risk & compliance department to have in-depth over view and audit of your AML/KYC in your TMS. If they are not satisfied, they can deny you banking privileges.
You would also need to show the segregation of pooled accounts vs Nostro/Vostro accounts, vs in-transaction accounts, etc.
On a technology stack-wise you would need a treasury (FX) system along with a micro-core banking software that hopefully can pool information in real-time from the bank's core-banking system (most likely they will provide you with OFX data streams for account reconciliation) as well as a corporate banking terminal access (which might have an API to connect to).