Account opening

Getting a bank account has become a struggle for many companies and even more so for financial institutions. As AML/CFT legislation and regulations continue to evolve and become more stringent each year, it impacts the financial industry, standard accounts, alternative payment methods, and also correspondent banking (yes, even banks have problems with bank accounts!).

With Aniva Consulting’s years of experience in the financial industry, you can always be sure that our experts will care about opening your account in an appropriate institution to meet your business needs. You just have to express your needs or requirements and we at Aniva Consulting will put our maximum efforts to find the best suitable institutions to cover your business requirements.

Operation vs. omnibus (collection, concentration) accounts

Each company needs an operational account that serves the purpose of transfers related to its day-to-day operations. This is a current account where payrolls or office related invoices or any other standard payments to suppliers, contractors etc are paid from. This account is often easier to obtain as, from an AML/CFT perspective, banks can easily monitor operational accounts.

On the other hand, omnibus accounts are a client account where the deposits of monies belonging to the clients of the companies are collected and withdrawn from. Imagine a financial institution having clients such as a bank, brokerage house, investment fund, casino etc. and that financial institution now needs an account where it would be able to deposit monies paid by its clients into (so that those clients may use the services of that institution). Omnibus accounts are opened for these purposes, i.e., for collecting the funds of all such clients under a single account (with a single IBAN or account number). Such accounts as you would expect, would be challenging for banks to open as it would pose a challenge to them in terms of meeting their AML/CFT obligations due to the number of deposits from varying persons or corporations. Based on this, opening an omnibus account has become harder for such institutions as banks generally consider such accounts as high risk and this results in higher workload for their various internal teams.

Correspondent accounts

Banks need to have cross border banking capabilities and facilitate the exchange of different currencies. This is where correspondent banking applies.

Correspondent banking is the provision of banking services by one bank (correspondent bank) to another (respondent bank – requesting the account). By establishing such accounts, banks are able to perform international financial transactions.

Correspondent accounts are vital for the execution of international transactions by banks. Aniva Consulting’s network of payment institutions and our experts working together with you, will help you to secure a correspondent banking account for your institution in a fast and simple way.

B2B vs. C2B/B2C

You may often see these abbreviations from account managers and some of you might be confused as to what they mean or what the difference is. So, what do those abbreviations mean?

B2B – is business-to-business, i.e., a transaction from one entrepreneur/company to another entrepreneur/company (not retail individuals or consumers), making it a pure business transfer.

C2B or B2C – is Consumer to Business (C2B) and Business to Consumer (B2C). This typically applies to transactions by a company (for example a merchant of a payment institutions) with its clients (retail, consumers, investors). Collection of monies paid by such clients to the merchant is often placed in an omnibus account belonging to a payment institution.

Segregation and safeguarding

In relation to financial institutions, you might have heard about two important obligations, and these are:

1. Segregation – this obligation is often imposed by Regulators on financial institutions to keep clients’ funds strictly separate (segregated) from the financial institution’s own funds. This is accomplished by the financial institution ensuring client funds are placed in an omnibus account and not mixed with the financial institutions’ own funds which are placed in operational accounts.
2. Safeguarding – Regulators often impose on Payment Institutions (“PIs”) and Electronic Money Institutions (“EMIs”) the need to have a safeguarding account to place clients’ funds in. Safeguarding accounts mainly prevent clients of PIs and EMIs from being negatively impacted if the institution goes into liquidation. As a safeguarding account is a trust account, even if the PI or EMI is liquidated, clients’ monies cannot be touched during the liquidation process, instead all client monies would be returned to the client safely or paid towards the party the client had provided instructions to transfer the monies to. Non-client funds cannot be commingled with client funds in a safeguarding account. Safeguarding accounts are also often opened or established in rigorously regulated credit institutions. Often the Regulator would place geographical or territorial limits on where the safeguarding account can be opened. For example, European EMIs must safeguard client funds only in EU credit institutions, while in Singapore, the credit institution must be within Singapore and regulated by the Monetary Authority of Singapore.

Alternative payment institutions (APIs)

A relatively new feature in the world of payments are alternative payment institutions (“APIs”). Of course, we could see different analogies in the history (e.g., old-fashioned version of hawala) that represented certain alternative to transaction business via banks, however, the real revolution of APIs came only at the end of the 20^th century.

There are of course plenty of them. However, let’s take a look at the most popular ones which are regulated in their respective jurisdictions. Most APIs (licensed by their country) work using a largely similar system. An API is required to open an omnibus account for its clients for their deposits or withdrawals, and this ensures its functionality. Without such an omnibus account, APIs are unable to perform its basic activities.

Examples of APIs:

Electronic money institutions (EMI – European Union)

Major Payment Institution or Standard Payment Institution (MPI or SPI – Singapore)

Money Service Operator (MSO – Hong Kong)

Money Service Business (USA, Canada, Latin America)

Fund Transfer Business Operator (Japan)