International Banking Flashcards

What is a wire transfer?

Answer: An electronic transfer of funds between banks, often used for large or international payments

Wire transfers electronically move funds between banks using networks like SWIFT for international transfers or Fedwire for domestic transfers.

What is foreign exchange (forex)?

Answer: The market for trading currencies at varying exchange rates

The forex market is where currencies are traded, with exchange rates fluctuating based on economic factors, supply and demand, and geopolitical events.

What is SWIFT in international banking?

Answer: Society for Worldwide Interbank Financial Telecommunication — a messaging network for international transactions

SWIFT provides a standardized messaging system that banks worldwide use to securely communicate transaction instructions for international payments.

What are exchange rate risks in international transactions?

Answer: The risk that currency value changes between initiating and completing a transaction, affecting the final amount

Exchange rate fluctuations can increase or decrease the actual cost of international transactions, creating financial uncertainty for businesses and individuals.

What is an international money order?

Answer: A prepaid financial instrument for sending money internationally, purchased from banks or post offices

International money orders provide a secure way to send money across borders, prepaid by the sender and cashable by the recipient at designated institutions.

What is anti-money laundering (AML) compliance?

Answer: Regulations and procedures banks follow to detect and prevent illegal money being processed through the financial system

AML compliance requires banks to verify customer identities, monitor transactions, and report suspicious activities to prevent criminals from legitimizing illegal funds.