when funds are wired between a domestic and a foreign bank that do not have a direct relationship a correspondent bank acts as the financial intermediary in the transaction to facilitate the wire the originator of the transfer sends the amount of the wire plus applicable fees to the vostro account held on its behalf by the correspondent bank the correspondent bank deducts the fees and the amount of the wire from the vostro account and executes a domestic wire to the receiving bank 
in this type of relationship the correspondent bank provides regular reports to the respondent bank this includes detailing the transactions balances and other relevant information related to the vostro account this helps the respondent bank monitor its financial activities in the foreign market and maintain oversight of its funds additionally this vostro account arrangement helps mitigate risks associated with cross border transactions both banks must adhere to regulatory requirements such as anti money laundering and consumer regulations ensuring compliance and enhancing the integrity of the financial system example of a vostro accountwith a vostro account relationship in place the customer of a domestic bank can walk into the office of a correspondent bank to withdraw or deposit funds for example to process a customer s withdrawal of funds at a correspondent bank the domestic bank deducts the withdrawal amount plus any fees from the customer s account and executes a transfer to the vostro account held by the correspondent bank the funds are converted to the local currency deducted from the vostro account and paid to the domestic bank s customer minus the applicable fees 