Risks of working with payment agents

A payment agent pays a foreign beneficiary in its own name at the client’s expense. The arrangement is lawful and widespread, but it has weak points. Most of the risks arise at the moment when the roubles have already been handed over but the payment has not yet been executed.

Main risks

• Money with the agent. The client has transferred roubles, and the agent has not executed the payment: it delayed it, closed down or had its accounts blocked. The money can only be recovered through a claim against the agent.
• Rejection along the bank chain. The agent’s bank, a correspondent bank or the beneficiary’s bank does not let the payment through. The money comes back with lost time and fees, or gets stuck in a review.
• The rate and hidden fees. The final price becomes clear only after payment: the FX markup, correspondent bank fees, “agent’s expenses”.
• A sub-agent without consent. The agent passes the payment to a third company the client knows nothing about.
• Documents. The agent does not provide a payment confirmation and a report, and the client has nothing to close the deal with for currency control.
• Restrictions. The agent or its bank is added to sanctions lists, and the route closes in the middle of the deal.

How to reduce the risks

• Check the agent before the first payment, not after a problem.
• Fix the rate, the fee and the deadline in documents before transferring the money.
• Prohibit a sub-agent without separate consent.
• Agree on the set of closing documents in advance.
• Do not keep all payments with one agent: if its destination closes, you need a backup path.

The broker’s role

A broker removes some of these risks through the way the deal is structured. At VEDmost, the agent, the route, the rate and the fee are fixed before the roubles are debited, and on request there is escrow: the roubles wait for execution in a special account at a Russian bank, for an additional fee. If a destination closes for one agent, we select another from the pool. A comparison of the models is on the Broker, agent or bank page.