Overseas Banking fees: What you need to know

payment inspection overseas2 Overseas Banking fees: What you need to know

International payments can be tricky. There is often confusion caused by use of multiple banks, different methods, and sometimes additional fees.

Below is AQF’s practice concerning payments received from our clients:

  • Logically, AQF Pays for its bank fees and of course only for its bank fees. We can not pay for our client’s bank fees.
  • In case there is a short payment, we will issue a debit note to the client.

Note that our bank is HSBC Hong Kong and that our bank fees for receiving TT are always 60 HKD to be converted in the currency of the payment, ususally around 8 USD. This is paid by AQF. Short payments which represent more than 8 USD show that either the client did not send the right amount or that an intermediary bank has taken some fees throughout the process without informing anyone!

Bank statement inspection11 Overseas Banking fees: What you need to know

In the above payment receipt, AQF was due $268, but in the end we only received $225, even though the client paid $35 in fees to his bank and asked to pay exactly $268 to AQF. Obviously this amount adds up (total bank fees for both parties are 268-225 + 35 + 7.73= $85.73!), and it varies greatly from client to client.

As you can see from the concrete example above, since October 2010, we have had some cases in which our clients’ payments to us or to other vendors have mysteriously come up short, even though they paid the correct amount, and their bank claims to charge no transfer fees, besides the ones they paid correctly when making the TT.

Why does this happen though?
We checked in with an expert at HSBC to get the scoop and here is his feedback:

“When processing a payment instruction, the remitting Bank reserves the right to effect the payment according to its routing arrangement. Appreciate your understanding that it is general banking practice for the correspondent/intermediary banks (chosen by the remitting bank) to collect their handling fees on the remittances subject to their tariffs. Regret that we are unable to provide details of the adjustment of overseas banks tariffs since October 2010.

As explained above, the overseas bank charge would be deducted prior to our receipt of the funds. Thus, there may be a shortfall on the net amount received by HSBC Hong Kong. In case the related overseas bank had not specifically outlined their charge information in the payment instruction, we are unable to illustrate the overseas bank charge in details on the transactional advices.

If you would like to avoid such charges borne by you in future, please liaise with the remitters for arranging the payments with all bank charges paid by remitters.”


Conclusion to draw from the HSBC expert:
Each banking organization has its own international payment routine. The payer bank (the bank of our client) will sometimes have to use an intermediary bank to get the money to the appropriate place. This usually involves extra expenses beyond what you see from your bank. We have examples of clients paying from HSBC France to our bank: HSBC Hong Kong and this French bank (HSBC Paris) will sometimes use HSBC London or HSBC New York as an intermediary bank to perform the TT from France to Hong Kong.

The unacceptable problems are:

  • No specific/written rules are applied here; despite our investigations, nobody has been able to explain us why intermediary banks are sometimes used or how the fees are calculated.
  • Neither the bank of our clients (the remittance bank) nor our bank (the receiving bank) communicate to their client (the importer and AQF) about those fees taken along the way!
  • Result: the bank is creates a conflict between the receiver and the payer !

We believe people can understand and agree to pay for some fees, but who can accept to pay fees when no bank statement from any side (receiving or remitter) will show those fees and no exact rule is known about the amount of those fees !?

How can you, as an importer ensure that you do not incur serious fees?

  • Ensure that you are using a bank who has the capability of sending TTs overseas and will not require intermediaries.
  • DO ask your bank if they will use an intermediary bank to proceed the TT and if this bank will charge you or the beneficiary.
  • Use payment service like http://fxglobaltransfer.oanda.com/ or Paypal, which assess very low fees and take minutes to process.

Anyone with more input about this intermediary bank fees? Feel free to share it here!

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22 thoughts on “Overseas Banking fees: What you need to know

  1. Intermediary bank fees are easy to explain. If you are sending money to a country in its currency you don’t pay them. If you are sending another currency then you pay them. Hong Kong has HKD as its currency. If you send HKD to a bank account in HK you don’t pay the fee. If you send USD tothe HKD Bank Account (it doesn’t matter if the account is a USD one with the bank) you will get an Intermediary Bank fee around USD20.

    • No this isn’t correct. I have received USD to my PKR account and not had to pay correspondent bank fees. And sometimes I’ve had to pay fees! So it has nothing to do with the currency. It all depends on the whims and fancies of the correspondent bank.

      • @abdussamad: thank you for your comment! It seems we are talking about the same here, that’s why it is highly recommended to select carefully the bank you will be working with for international transfers. You can refer to the last part of the article “How can you, as an importer ensure that you do not incur serious fees?” to read some tips. Feel free to share yours if you want. :)

    • I can confirm that this is actually correct. I sent a T/T from my HSBC multi-currency account in Australia in HKD to an HSBC account in HK and there was no intermediary bank fee, only the 65HKD fee for them to received the T/T.

      Previously when I sent them USD, there was another 21USD fee most of the time.

  2. Many thanks. I am experiencing the same problem. We are a company based in Italy and every time someone from the USA, Canada or Australia transfer money to us,  the intermediary bank takes a ridiculously high fee.   I have been advised to switch to Paypal (or similar) to avoid these charges, however, this means we then have to pay a commission on every transaction whereas at the moment, we are only paying a fee on non-european transactions.    Is there a way that our receiving bank in Italy  can advise who the intermediary bank is so that we can negotiate reduced charges?

    • Hi MBC Consulting,

      It seems numerous companies have the same issue with bank fees. I think most companies are willing to pay bank fees, this is not the question, but who can accept to pay for hidden/non declared fees? Someone working at HSBC told me in private that this was put in place by banks after the Madoff scandal; I can’t be sure about this but I do not have a better explanation now since all our requests to HSBC were unsuccessful to know the truth; they always succeed to cloud the issue.

      Yes your bank can know the intermediary bank but it seems they need to ask questions internally and usually it cost about 30 Euros to get the information ! Just enough to discourage you..
      Now other services exist for international TT which are much easier, much cheaper, with no hidden fees like with traditional banks, for example: http://fxglobaltransfer.oanda.com/

      Happy China Sourcing !

      • Intermediary/correspondent bank fees have been around since SWIFT has been around. It is definitely NOT a new invention made in response to Madoff’s scams or anyone else’s scams.

        OandA’s fxglobal transfer also uses the SWIFT system. So there will be the same uncertainty regarding correspondent bank fees. Actually it is worse because you have to wire the money first to OandA from your bank and then to your final recipient incurring double charges.

        • @abdussamad: thank you for sharing your opinion with us! You are right regarding the fees, it is an old situation. The main issue here is that some fees are out of control from the sender and the receiver bank. It seems there is a grey area here. For international payment systems such as Paypal or fxglobal, the fees are already mentioned in the service pricelist, avoiding any surprise. That’s the main advantage. :)

  3. Many thanks. I am experiencing the same problem. We are a company based in Italy and every time someone from the USA, Canada or Australia transfer money to us,  the intermediary bank takes a ridiculously high fee.   I have been advised to switch to Paypal (or similar) to avoid these charges, however, this means we then have to pay a commission on every transaction whereas at the moment, we are only paying a fee on non-european transactions.    Is there a way that our receiving bank in Italy  can advise who the intermediary bank is so that we can negotiate reduced charges?

    • @Steven: Thank you for your comment! Do you also face this situation when you are paying a supplier overseas? The petition seems to be related to the opposite direction. :)

      • My petition relates only to incoming transfers from a recipient’s perspective, Claire. So far as my experience goes, when remitting funds, the remitter knows what the fees will be, and can elect to pay the recipient party fees as well, which is usually exaggerated by the sending bank because the sending bank will claim not to know what the recipient bank will charge. Something like that anyway.

        • Steven,

          I wanted to sign your petition but the signatures are now closed.

          Fifty four million people’s $ 24 ‘eaten away’ by intermediary banks in 2012 alone this way in Australia, without the customers knowing and without showing the charges either in the remitter’s account or the beneficiary’s account is daylight robbery indeed!

          I was recently charged $ 15 by an intermediary bank (within Australia) for a transfer I initiated through HSBC Australia to my account in India and paid them $ 20 for the service. The beneficiary bank had ‘no idea’ where the money ‘disappeared’ however upon questioning the top bosses I came to know about the ‘intermediary bank’ that was used – it turned out to be the Indian bank’s own branch in Sydney !

          And as David Fisher said ” most companies are willing to pay bank fees, this is not the question, but who can accept to pay for hidden/non declared fees”, having been robbed off an extra $ 15 didn’t seem right.

          I also wonder if the fees charged by intermediary banks are fixed or vary with the amount transferred.

          Have sent a mail to the intermediary bank as well as APRA, not sure if I will get a reply.

          Incidentally, the way banks route their transactions through intermediary banks, Telecom industry also routes its calls through several international/national carriers. The fee charged by every single carrier called ‘interconnect charges’ are clearly set out and there is no ‘grey’ area.

          Unlike banking, ‘interconnect charges’ in Telecom are never collected from the party ‘making the call’ or the party ‘receiving the call’. The ‘carriers’ settle these charges among themselves. This is a well documented area without any ambiguities and works without any problem. Telsta pays millions of dollars every month to other carriers to route its calls and similarly it receives millions from other carriers routing their calls through Telstra.

          Perhaps banks need to learn from Telecom companies !

          • @PJ: thank you for your great input, let us know if you get an answer from the intermediary bank!

          • PJ, I do plan to reignite that petition, updating it with new information, but I need to get somebody interested from the mainstream media to help bring attention to it. “Financial Redress” keeps hitting the media, yet this issue is many times greater, in terms of monetary value, than the issue tackled by Financial Redress, yet nobody seems interested.

  4. Thank you for bringing up this information. I am an online freelancer and paid in USD. I live in Indonesia so I use my local bank to receive my payment in IDR. Unfortunately, my employer only paid me via wire transfer, so I found the same gray intermediary bank fee (my employer paid their bank charge).
    I wonder if I could switch my own bank to an international bank in my country, so there will be no intermediary bank fee. Will that switch solve this intermediary bank fee annoyance?

    • @hamdanmuhammad616: thank you for your question. You can try to do so, and also consider to use the same bank than your current employer if it exists in your country. However keep in mind those fees may appear again as it is linked to the sender bank. It depends if his bank needs to go through an intermediate or not. In Spain for example, most of the banks (all international and European ones) are sending their money to an intermediary bank based in UK.

  5. I understand that the need to use an intermediary bank may be dependent on the country where the remittance originates. However i also understand that there are banks in the receiving countries (China, HK, India) who have special arrangements with specific US Banks to make the transfer cheaper or at no cost. That is why there is a lot of misunderstanding about who actually controls the cost options..the importer or the exporter.
    As an importer my bank says it has no control…and often the exporter has no idea why the money “disappeared”.

    • @Joshua: Thank you for your comment. We also face this situation very regularly at Asia Quality Focus. The sender bank seems to have no idea about the real fee charged and why it is charged however the bank is usually located in his region.

  6. Hi!! I am studying Overseas Banking and Intermediaries right now.. However, I don’t know what site or what references i will use.. Can you help me with this?? Many thanks!!

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