Definition of bank transfer

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What is a bank transfer?

A wire transfer is an electronic transfer of funds through a network administered by hundreds of banks and money transfer agencies around the world. The transfer can also be made in cash at a cash desk.

Key points to remember

  • A wire transfer is a transfer of funds made electronically through a network of banks or transfer agencies around the world.
  • Senders pay the transaction to the remitting bank and provide the recipient’s name, bank account number, and the amount transferred.
  • Most wire transfers can take up to two business days to process.
  • International money transfers are monitored by the Office of Foreign Assets Control to ensure that money is not transferred to terrorist groups or for money laundering purposes.

Understanding wire transfers

Wire transfers allow the individualized transmission of funds from individuals or individual entities to others while maintaining the efficiency associated with the fast and secure movement of money. By using a wire transfer, people in different geographies can securely transfer money to places and financial institutions around the world.

A wire transfer is most often used to transfer funds from one bank or financial institution to another. No physical money is transferred between banks or financial institutions during a wire transfer. Instead, information is transmitted between banking institutions regarding the recipient, the account number of the receiving bank, and the amount transferred.

The sender of a wire transfer first pays the transaction to their bank. The issuing bank sends a message to the recipient’s bank with payment instructions through a secure system, such as Fedwire or SWIFT. The recipient’s bank receives all the necessary information from the initiating bank and deposits its own reserve funds in the correct account. The two banks then settle the downstream payment (once the money has already been deposited).

Non-bank transfers do not require a bank account number. Western Union, whose international money transfer service is available in more than 200 countries, is a popular non-bank bank transfer company.

All legitimate wire transfers take up to two days to process. If an electronic payment method takes more than a few days, it can’t really be considered a wire transfer. A domestic bank transfer is processed the same day it is launched and can be received within hours. International transfers are normally delivered within two working days.

The reason for these two different delays stems from the use of domestic Automated Clearing Houses (ACHs) and foreign processing systems. A domestic bank transfer only needs to go through a domestic ACH and can be delivered within the day. International transfers must clear a domestic ACH as well as its foreign equivalent (thus adding an extra day to the process).

Wire transfers cost money to initiate, whether they are domestic or international transfers. Some domestic wire transfer providers charge as little as $ 25 per transaction, but the fees can be as high as $ 35 or more. International money transfers sometimes have higher fees, up to $ 45.

Special considerations

Wire transfers are generally safe and secure, as long as you know the person receiving them. If you are using a legitimate wire transfer service, everyone involved in a wire transfer transaction should be required to prove their identity so that anonymous transfers are not possible.

International wire transfers that originate in the United States are monitored by the Office of Foreign Assets Control, an agency of the United States Treasury. This agency ensures that money sent abroad is not used to finance terrorist activities or for money laundering purposes. In addition, they are also responsible for preventing the money from going to countries subject to sanctions by the US government. If the Office of Foreign Assets Control suspects that either of these scenarios is true, the issuing bank has the power to freeze the funds and prevent the wire transfer from going through.

Here are some scenarios that could result in a wire transfer being reported, alerting those responsible for possible wrongdoing by the recipient or sender:

  • Transfers to countries of refuge
  • Transfers to non-account holders
  • Regular transfers without valid reason
  • Incoming and outgoing wires with the same dollar amount
  • Large amounts transferred by treasury companies

Frequently Asked Questions

How is a bank transfer made?

A wire transfer is most often used to transfer funds from one bank or financial institution to another. No physical money is transferred between banks or financial institutions during a wire transfer. Instead, information is transmitted between banking institutions regarding the recipient, the account number of the receiving bank, and the amount transferred.

The sender of a wire transfer first pays the transaction to their bank. The issuing bank sends a message to the recipient’s bank with payment instructions through a secure system, such as Fedwire or SWIFT. The recipient’s bank receives all the necessary information from the initiating bank and deposits its own reserve funds in the correct account. The two banks then settle the downstream payment (once the money has already been deposited).

What are the advantages of bank transfers?

Wire transfers allow the individualized transmission of funds from individuals or individual entities to others while maintaining the efficiency associated with the fast and secure movement of money. The sender can initiate a wire transfer quickly and the recipient can access the funds immediately as there is usually no bank hold on the money. In addition, wire transfers allow people in different geographies to securely transfer money to places and financial institutions around the world.

How secure are bank transfers?

Wire transfers are generally safe and secure, as long as you know the person receiving them. A legitimate wire transfer service will verify the identity of every entity involved in a wire transfer transaction so that anonymous transfers are not possible. International wire transfers that originate in the United States are monitored by the Office of Foreign Assets Control, an agency of the United States Treasury. This agency ensures that money sent abroad is not used to finance terrorist activities or for money laundering purposes. In addition, they are also responsible for preventing the money from going to countries subject to sanctions by the US government.


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