If you are using standard financial institutions to transfer money domestically in the United States or internationally, you’ll come across different standards for bank codes. In this article, we’ll identify the key distinctions between ABA validation, IBAN, and SWIFT to help you gain a further understanding of the different financial identifiers around the globe.
When working with banks in the US, you’ll use an ABA routing number. The ABA routing number was developed by the American Bankers Association (ABA) in 1910. It’s a unique code used to identify the specific financial institution responsible for the payment of a negotiable instrument and is required along with your account number, bank name and recipient details to perform transfers of funds.
Over the years, the ABA routing number has evolved and now accommodates the Federal Reserve System, Magnetic Ink Character Recognition (MICR), and the Expedited Funds Availability Act (EFAA).
Outside the domestic U.S., there are other forms of identification for financial institutions. One of which is the International Bank Account Number (IBAN), which is used in many countries around the world. Similar to ABA validation, the IBAN is a code that contains information about the receiving country, bank, and branch. This code also includes your organization’s unique account number.
To learn more about IBAN validation, read our article on this topic here.
Another international financial institution identifier is the Bank Identifier Code (sometimes called SWIFT), which is also used in many countries around the world. This code contains information about the receiving country, bank, and branch. When using BIC, your organization will also have to include its unique account number.
To learn more about BIC code validation, read our article on this topic.
For organizations operating in multiple countries, payroll can start to get complicated – especially regarding the transfer of foreign currency.
We recommend teaming up with a third-party payroll provider, like Celergo, that can consolidate your global payroll and be your single funding source for paying employees, authorities, and third parties in multiple local currencies. This service is commonly referred to as treasury management and you can learn more in this post we put together a little while back. In addition to reducing the stress on your team, Celergo helps maintain strict compliance to Office of Foreign Asset Control (OFAC) regulations and other international requirements that affect global funds transfers.
If you have any questions regarding ABA validation, IBAN, or SWIFT and how these relate to employee payments, please contact us. We have an amazing, full-service treasury management team at Celergo. We are here to help, so please contact us!
**This article is for informational purposes only. It is not intended to constitute legal advice.