Money & Finance › Payments & money movement › Cross-border payments: moving money between countries
Correspondent banking: nostro and vostro accounts
· Concept
Fact, law or dataA rule, statute, definition or measured number.
Banks keep accounts at each other, mostly dollar accounts at big New York banks, so money can cross borders as ledger entries.
See it on the Money & Finance map →How it works
A Korean bank keeps a dollar account at a New York bank such as JPMorgan or Citi. The Korean bank calls it its 'nostro' (Latin for 'ours': our money at your bank); the US bank calls it a 'vostro' ('yours'). A cross-border payment is a SWIFT message plus a debit and a credit on these accounts. When two banks share no account, one or more intermediary banks relay it, each taking a fee, often $10–$50, and some time.
Why it matters
Nearly every international wire, trade payment and remittance settles this way, which makes the big dollar-clearing banks the gatekeepers for sanctions and money-laundering checks.
Think of it like
Like keeping a running tab with a supplier in each city: you settle by adjusting the tab, not by shipping cash.
Facts, rules and data
BIS payments-committee (CPMI) data, SWIFT message statistics, and Treasury and FinCEN rules on correspondent accounts; the BIS reports active correspondent relationships fell by roughly a quarter to a third since 2011.
Debates and risks
How far 'de-risking', banks dropping correspondents in small or risky countries, pushes payments into costlier or informal channels, and whether newer systems can replace the chain.
Connections (4)
▸Correspondent banking: nostro and vostro accounts is the backbone of Cross-border payments: moving money between countriesFact, law or data
The connection
Most international payments are chains of correspondent accounts. A Los Angeles importer pays a Seoul supplier: the US bank debits the importer, sends a SWIFT message and credits the Korean bank's dollar account, or routes through an intermediary that holds one. Each link adds a fee and a compliance check, which is why international wires cost more and can arrive short.
When and why
Worldwide, centered on New York for dollars; SWIFT, founded in Belgium in 1973, carries the payment messages.
How we know
BIS and Financial Stability Board reports on cross-border payments, and SWIFT data on payment routing and speed.
Debates and risks
Whether faster alternatives, such as linked instant-payment systems, stablecoins or central-bank platforms, will bypass correspondent chains or simply plug into them.
▸Correspondent banking: nostro and vostro accounts is the choke point for Financial sanctions and 'weaponizing' the dollarFact, law or data
The connection
Foreign banks need US correspondent accounts to pay in dollars, and those US banks must block payments involving anyone on the Treasury's sanctions lists. Cutting a foreign bank off from correspondent access shuts it out of most dollar trade, so the threat reaches banks far beyond US borders.
When and why
Enforced by Treasury's OFAC; BNP Paribas agreed to pay about $8.9 billion in 2014 for moving dollars through US banks for Sudan, Iran and Cuba.
How we know
OFAC regulations and enforcement actions, the BNP Paribas guilty plea, and Treasury's 2005 action against Banco Delta Asia over North Korean funds.
Debates and risks
Whether heavy use of this choke point speeds 'de-dollarization' as targets build alternatives, or shows the dollar system is too useful to leave.
▸Correspondent banking: nostro and vostro accounts must screen foreign banks under Bank Secrecy Act and anti-money-laundering rulesFact, law or data
The connection
Under the USA PATRIOT Act's additions to the Bank Secrecy Act, US banks must run due diligence on foreign banks holding correspondent accounts, may not deal with shell banks, and can be ordered to cut off a foreign bank Treasury names a 'primary money laundering concern'. Weak screening has drawn huge penalties.
When and why
PATRIOT Act sections 311–313 (2001); Danske Bank pleaded guilty in 2022 over about $160 billion its Estonian branch moved through US banks.
How we know
FinCEN due-diligence rules (31 CFR 1010.610), section 311 actions, and Justice Department guilty pleas by Danske Bank (2022) and TD Bank (2024).
Debates and risks
How much compliance cost drives US banks to drop correspondents in poorer countries, cutting them off from legitimate dollar trade.
▸Eurodollars: the offshore dollar banking system settle through Correspondent banking: nostro and vostro accountsFact, law or data
The connection
A dollar deposit in London is ultimately backed by the London bank's own dollar account at a US bank, its 'nostro' account in New York. When eurodollars move between banks, final settlement runs through those correspondent accounts and US systems like CHIPS and Fedwire. That US touchpoint gives US sanctions their global reach.
When and why
New York, the hub of dollar clearing; CHIPS has operated since 1970.
How we know
CHIPS and Fedwire volume data, and enforcement cases such as BNP Paribas's $8.9 billion penalty in 2014 for clearing sanctioned dollar payments.
Debates and risks
Some offshore dollar transfers net out on a single bank's own books without touching New York; how much is unclear.