Here is what happens:
Now for a practical example:
Lets say you want to transfer 50 Euros from the Regional Bank of Omaha to your friend that is living in Germany and has an account at Regional Bank of Berlin.
You would walk to your branch, (or login to your online banking account) and enter information for your friend’s account and branch in Berlin. You enter the amount of transfer as 50 EUR.
As you have a US dollar account, the bank will apply a rate and deduct the equivalent of 50 euros in dollars from your account; it will take this amount and place it in an internal reconciliation account.
It will then send a message over SWIFT to its correspondence account for Euros which lets say is Deutsche Bank. Deutsche Bank receives this message and checks the final beneficiary bank.
If the beneficiary bank has an account at Deutsche Bank, then Deutsche Bank will transfer the funds (minus its fees) to the corresponding account of Regional Bank of Berlin; and notify them (again, via a SWIFT message) that they have incoming transfer and the amount. The process ends and then your friend’s account will get credit the net amount (the original 50 Euros, minus any fees).
If the beneficiary bank does not have an account with Deutsche Bank, Deutsche Bank transfer the funds from the Regional Bank of Omaha’s account with them to another bank which holds an account for the Regional Bank of Berlin; and the same process applies.
There are various regulatory measures in place – mainly to prevent the transfer of funds for illicit or illegal purposes; to stop the financing of terrorism, or to prevent money laundering. Recipient names are also checked against a global blacklist.
In some cases, extra information may be required (such as the purpose of funds) or more details of the recipient (such as a passport number).
In other instances the transfer may be rejected if the beneficiary account is closed or blocked; sometimes transfers are rejected simply because there is a typo and a 3 became a 8, etc.