Flow-of-Funds Diagram Templates
This appendix provides templates and descriptions of common flow-of-funds patterns in money transmission. For each pattern, I provide a prose description and an ASCII diagram. You can use these as templates for documenting your own flows.
Pattern 1: Domestic Remittance (Simplest Flow)
Description: Customer deposits cash with an agent or retail location. Funds are transmitted domestically to a beneficiary in another state. Agent transmits funds to headquarters. Headquarters transmits to a settlement partner in the beneficiary's state.
CUSTOMER AGENT HEADQUARTERS SETTLEMENT BENEFICIARY
(NYC) (NYC) (HQ in CA) PARTNER (TX)
| | | (TX) |
| Cash $500 | | | |
|-------- deposit --->| | | |
| | Records trans, | | |
| | screens cust. | | |
| | Transmits to HQ | | |
| |-- ACH $485 ----->| | |
| | | Receives, | |
| | | screens, | |
| | | forwards to | |
| | |-- ACH $485 -->| |
| | | | Holds $485, |
| | | | beneficiary |
| | | | collects at |
| | | | location or ATM |
| | | |--- deliver ---> |
| | | | $485 |
| Receipt issued | | | |
|<---- receipt -------| | | |
Control Points: - Agent verifies customer ID - Headquarters runs OFAC screening - Funds held in trust at both agent (if agent holds funds) and headquarters - Headquarters holds funds until settlement partner confirms receipt
Pattern 2: Cross-Border Remittance (Remittance to Mexico)
Description: Customer deposits in US. Funds are transmitted to Mexico through a correspondent bank or remittance partner in Mexico. Beneficiary receives funds.
CUSTOMER AGENT/ HEADQUARTERS US BANK/ MEXICO CORR. BENEFICIARY
(USA) BRANCH (USA) PROCESSOR (MEXICO) (MEXICO)
| | | | | |
| Cash $1000 | | | | |
|-- deposit --->| | | | |
| | Screens cust, | | | |
| | collects ID | | | |
| | Verifies benef | | | |
| |-- submits --->| Validates | | |
| | | Screens OFAC | | |
| | | Conducts EDD | | |
| | |-- wire ----->| Receives, | |
| | | $980 | screens, | |
| | | | forwards to | |
| | | | Mexico corr | |
| | | |--- wire --->| Receives |
| | | | $950 | Converts if |
| | | | | needed |
| | | | | Delivers to |
| | | | | beneficiary |
| | | | |--- pays --->|
| | | | | $950 |
| Receipt | | | | |
|<-- receipt ---| | | | |
Control Points: - Customer ID per FCRA standards - Beneficiary identity verification (passport, national ID if required) - OFAC screening of customer and beneficiary - EDD if customer is high-risk - Correspondent due diligence (audits, compliance certs) - SWIFT/ABA compliance for cross-border
Pattern 3: Cryptocurrency On-Ramp (Fiat to Crypto)
Description: Customer deposits fiat currency (USD). Funds are held by the operator. Customer purchases cryptocurrency through the platform. Cryptocurrency is transferred to customer's wallet.
CUSTOMER PLATFORM PLATFORM BLOCKCHAIN CUSTOMER
(USD) (USA) WALLET NETWORK WALLET
| (GUI) (HOT/COLD) (CRYPTO)
| | | | |
| Login | | | |
|-- connect -->| | | |
| | KYC/AML | | |
| | screening | | |
| | runs | | |
| | | | |
| Deposits | | | |
| $5000 USD | | | |
|-- ACH ------>| Receives via | | |
| | ACH, holds in | | |
| | trust account | | |
| | | | |
| Places order | | | |
| 1 BTC @ 42k | | | |
|-- submit --->| Executes order | | |
| | Purchases 1 BTC | | |
| | from exchange | | |
| | or inventory | | |
| | Transfers BTC | | |
| | from hot/cold | | |
| | wallet -------- transaction ---->| Broadcasts |
| | | | Settles |
| | | | on blockchain |
| | | |--- BTC -------->|
| | | | delivered |
| | | | to customer |
| | | | wallet |
| Confirmation | | | |
|<---- email --| | | |
Control Points: - Customer KYC/AML screening - Fiat deposit held in trust account (FDIC-insured) - Cryptocurrency held in custody (hot wallet for active, cold storage for excess) - Customer wallet address verified before transfer - Blockchain transaction recorded and verified - Stale wallet address detection (customer provides same wallet address repeatedly)
Pattern 4: Cryptocurrency Off-Ramp (Crypto to Fiat)
Description: Customer transfers cryptocurrency to the platform wallet. Platform exchanges crypto for fiat. Fiat is delivered to customer's bank account.
CUSTOMER PLATFORM PLATFORM BANK CUSTOMER
(CRYPTO) WALLET (USD) (USA) (USD)
| (HOT) TRUST ACCOUNT ACCOUNT
| | | | |
| Customer | | | |
| initiates | | | |
| withdrawal | | | |
|-- request -->| Platform | | |
| | provides wallet| | |
| | address | | |
| | | | |
| Transfers | | | |
| 1 BTC to | | | |
| platform | | | |
|-- transfer ->| Blockchain | | |
| on blockchain| verifies | | |
| | Settlement | | |
| | confirms | | |
| | | | |
| | Exchanges BTC | | |
| | for USD at | | |
| | market rate | | |
| | or exchange | | |
| | | | |
| | Withdraws USD | | |
| | from custody | | |
| | and deposits | | |
| | in trust acct | | |
| |-- ACH -------->| Receives USD | |
| | | Forwards to | |
| | |-- ACH ------->| Deposits USD |
| | | |--- funds ------>|
| | | | in customer |
| | | | account |
| Confirms | | | |
|<---- receipt | | | |
Control Points: - Customer identity and account verification - Blockchain transaction confirmed (number of confirmations met) - Cryptocurrency custody confirmed - Customer bank account verified (matches customer ID) - Anti-money laundering screening at withdrawal - Exchange rate transparency (customer knows rate before transfer) - Trust account for fiat (FDIC-insured)
Pattern 5: Agent Model (Multi-Agent Network)
Description: Licensed MSB operates agents in multiple locations. Agents accept customer transactions on behalf of the MSB. MSB maintains compliance responsibility. Agents settle regularly.
CUSTOMER 1 AGENT 1 MSB HQ SETTLEMENT CUSTOMER 2
(Location 1) (Location 1) (HQ) BANK (Location 2)
| | | | |
| Wants to send | | | |
| $500 to | | | |
| beneficiary | | | |
|-- visit ----->| Collects ID | | |
| | Customer info | | |
| | Beneficiary | | |
| | info | | |
| | Runs screening | | |
| | (or MSB does) | | |
| Hands cash | | | |
|-- deposit --->| Holds cash | | |
| | (agent trust | | |
| | account) | | |
| |-- submits --->| Receives | |
| | transaction | transaction | |
| | details via | data, screens, | |
| | system | verifies | |
| | | | |
| |<-- approval --| | |
| | | | |
| |-- transfers ->| Settlement | |
| | agent funds | bank receives | |
| | (daily/weekly)| | |
| | |-- wire ----->| Beneficiary |
| | | $485 | receives |
| | | | (or cash out |
| | | | at agent 2) |
| | | | |
| | | | |
| Receives | | | | Receives
| receipt | | | | payment
|<-- receipt ---| | | |<-- cash --|
Control Points: - Agent due diligence (background, beneficial ownership, sanctions check) - Agent training on KYC, AML, transaction procedures - Transaction submission by agent to MSB (often via mobile app or web portal) - MSB compliance review of transactions - MSB OFAC screening (can be agent responsibility but MSB verifies) - Agent fund settlement (daily, weekly, or monthly) - MSB ongoing monitoring of agent transactions - MSB audit of agent locations (quarterly or semi-annually) - Agent termination procedures