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Payable-Through Account

Definition

A payable-through account (PTA) is an account structure in which a foreign financial institution (FFI) maintains an account with a domestic bank that allows the FFI’s underlying customers to conduct transactions directly through that account as though they were customers of the domestic bank.

The domestic institution sees only the foreign bank as its direct customer, while the foreign bank maintains the underlying client records.

This arrangement creates significant AML/CFT exposure because the domestic institution may have limited or no visibility into the identities, risk profiles, or transaction behaviours of the FFI’s customers who are effectively accessing the domestic financial system.

PTAs are historically associated with correspondent banking and offshore financial centres.

When misused or poorly supervised, they can serve as conduits for anonymous cross-border flows, layering activities, and tax-evading structures.

Regulators globally consider PTAs high-risk because they involve indirect access to financial systems through intermediaries whose AML standards may not meet domestic expectations.

Explanation

A PTA enables foreign banks to offer their customers access to domestic banking services without each customer being individually onboarded by the domestic institution.

Through a master account held by the FFI, its clients can write cheques, execute payments, initiate transfers, or hold assets indirectly.

This makes PTAs operationally efficient but also structurally opaque.

The domestic bank’s reliance on the FFI’s AML programme creates dependency risk.

If the FFI fails to conduct appropriate customer due diligence (CDD), enhanced due diligence (EDD), beneficial ownership verification, or transaction monitoring, the domestic institution unknowingly becomes an access channel for unidentified or high-risk customers.

Criminal networks exploit PTAs to obscure origin, routing, and beneficiaries of funds. PTAs are attractive for illicit purposes because:

  • The domestic bank sees only the aggregated activity of the FFI.
  • Underlying client transactions may mimic legitimate activity.
  • Jurisdictional differences in KYC obligations create monitoring blind spots.
  • Cross-border flows complicate investigative traceability.

As a result, PTAs require particularly stringent controls, specialised monitoring rules, and robust oversight frameworks.

Payable-Through Accounts in AML/CFT Frameworks

Within AML/CFT regimes, PTAs intersect with several critical areas: correspondent banking risk, transparency obligations, beneficial ownership standards, and reliance on third-party due diligence.

Key AML/CFT considerations include:

  • Domestic banks must perform full due diligence on the foreign financial institution, including understanding its customer segments, jurisdictional risks, governance quality, and transaction-monitoring capabilities. 
  • The FFI must provide, upon request, immediate access to underlying customer information, including beneficial ownership and transactional documentation. 
  • Domestic institutions must assess whether the FFI allows its customers direct access to the account, which significantly elevates risk. 
  • Supervisors expect domestic banks to periodically test the FFI’s AML controls, not merely rely on written assurances. 
  • PTAs are classified as inherently high-risk in many jurisdictions, requiring enhanced monitoring, contractual restrictions, or outright prohibition in some cases.

Key Components of a Payable-Through Account Arrangement

Structural Characteristics

A PTA typically includes:

  • A master account opened by a foreign financial institution at a domestic bank.
  • Direct access rights for the FFI’s customers, enabling them to conduct transactions.
  • Aggregated inflows and outflows visible only at the FFI level.
  • Sub-account records maintained exclusively by the FFI.
  • Delegated AML responsibility resting, in practice, with the FFI rather than the domestic institution.

Operational Use Cases

Legitimate (but high-risk) operational applications can include:

  • PTAs supporting foreign banks servicing diaspora communities or cross-border businesses.
  • Offshore banks providing clients with indirect access to domestic payment networks.
  • Correspondent banks enabling cheque-clearing or payment-processing services for foreign institutions.
  • Multinational groups using foreign branches to intermediate intra-group liquidity.

Because these arrangements grant indirect access to domestic systems, regulators often limit or tightly control their use.

Risks & Red Flags Associated With Payable-Through Accounts

PTAs introduce elevated AML/CFT risks due to their structural opacity and cross-border nature.

Primary Risk Drivers

  • Lack of visibility into underlying customers of the foreign bank.
  • Weak or inconsistent AML controls at the FFI.
  • Potential use of the FFI by shell companies, nominees, or high-risk customer profiles.
  • Vulnerability to layering through aggregated transactions.
  • Exposure to jurisdictional arbitrage where the FFI operates under weaker regulatory standards.

Indicative Red Flags

  • The foreign institution is unable or unwilling to provide customer information, including KYC/EDD and beneficial ownership records.
  • Unusual spikes in PTA activity without plausible economic rationale.
  • High-volume transactions inconsistent with the FFI’s known business model.
  • Repeated round-tripping between jurisdictions with strategic AML deficiencies.
  • Patterns resembling nested correspondent banking, where the FFI acts as an intermediary for other unknown institutions.

Common Methods & Techniques for Misuse

Criminal misuse of PTAs typically involves techniques that exploit opacity and delegation of diligence.

  • Layering through aggregated transfers where illicit funds blend into lawful flows.
  • Use of shell companies or nominee entities hidden within the FFI’s customer base.
  • Nested correspondent banking in which the FFI serves as a conduit for other institutions lacking direct access to the domestic system.
  • Use of PTAs in tax evasion schemes, routing undeclared income through offshore banks.
  • Abuse by rogue or lightly regulated offshore banks, providing anonymity to transnational crime networks.

Examples of Payable-Through Account Scenarios

Offshore Bank PTA With High-Risk Client Base

A Caribbean-based bank opens a payable-through account in a European financial institution.

Its client base includes offshore companies with opaque ownership.

Criminal networks inject illicit proceeds via these companies, which then move through the PTA into the European banking system, masked by aggregation.

Nested PTA Through a Weakly Regulated FFI

A foreign financial institution with insufficient AML controls processes transactions for multiple smaller institutions through its PTA.

The domestic bank unknowingly provides indirect access to numerous entities it has never vetted.

Trade-Based Laundering via PTA

A foreign bank routes payments tied to manipulated trade invoices through a PTA.

Because the domestic bank does not see the underlying clients or commercial documents, it cannot assess the legitimacy of the flows.

PTA Used for Cyber-Enabled Fraud Proceeds

Fraud networks use accounts at an offshore bank to collect cybercrime proceeds.

These are rapidly transferred through the PTA to disperse funds across multiple jurisdictions before victims or authorities detect the fraud.

Impact on Financial Institutions

Consequences of mismanaged PTAs can be severe:

  • Enforcement actions, civil penalties, or restrictions for failing to identify high-risk structures.
  • Termination of correspondent banking relationships by larger, risk-averse institutions.
  • Significant reputational harm due to indirect facilitation of criminal or terrorist financing activity.
  • Increased investigative workloads and operational costs tied to enhanced monitoring.
  • Legal exposure arising from facilitating illicit transactions through an opaque access channel.

Financial institutions must therefore maintain strong governance, clear accountability, and robust control frameworks around PTA relationships.

Challenges in Detecting & Preventing Abuse

The structural features of PTAs create several systemic challenges:

  • Limited visibility into the FFI’s customer base and transaction purpose.
  • Difficulty identifying anomalous patterns within aggregated transaction flows.
  • Cross-border fragmentation of regulatory standards and supervisory cooperation.
  • Reliance on the FFI’s data quality, monitoring systems, and compliance culture.
  • Constraints in obtaining timely documentation during investigations.

Detecting abuse requires an intelligence-led approach, combining risk scoring, pattern analysis, enhanced due diligence, and periodic audits of the FFI’s AML programme.

Regulatory Oversight & Governance Expectations

Global regulators consider PTAs high-risk and impose strict governance mandates, including:

  • Full CDD and EDD on the foreign bank before onboarding.
  • Confirmation that the FFI applies equivalent or stronger AML/CFT standards.
  • Contractual obligations requiring the FFI to provide timely underlying customer information.
  • Prohibition of PTAs if the FFI cannot demonstrate robust KYC and monitoring controls.
  • Continuous monitoring and periodic testing of the FFI’s AML capabilities.
  • Escalation and exit processes when transparency or cooperation issues arise.

International guidance emphasises that correspondent banks should not allow PTAs where there is insufficient transparency regarding underlying customers.

Importance of Addressing Payable-Through Account Risks in AML/CFT Compliance

Effective management of PTA risk supports financial integrity by:

  • Preventing exploitation of domestic banking systems by foreign customers with unknown risk profiles.
  • Reducing exposure to regulatory sanctions, reputational damage, and legal penalties.
  • Ensuring compliance with FATF Recommendations on correspondent banking and wire transfer transparency.
  • Improving system-wide traceability, beneficial ownership visibility, and cross-border cooperation.
  • Strengthening intelligence-driven AML frameworks that rely on data quality and end-to-end visibility.

Given their structural opacity, PTAs demand heightened vigilance, strong governance, and ongoing oversight to prevent misuse for money laundering or terrorist financing.

Related Terms

  • Correspondent Banking
  • Nested Correspondent Banking
  • Beneficial Ownership
  • Foreign Financial Institution (FFI)
  • Enhanced Due Diligence (EDD)
  • Layering

References

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