How is it done?

Basic Domestic Transfers:

YOUR BANK > FEDERAL RESERVE > RECEIVING BANK

1. You go to your bank in Dallas and inform the bank teller that you want to make a wire transfer to you brother's account at a bank in Chicago.

2. Your bank has an account at the Federal Reserve (Fed account).

3. Your brother's bank in Chicago has an account at the Federal Reserve.

4. Your bank initiates the transfer via Fedwire, debiting your bank account for the funds.  You can include the wire transfer fees in the debit or pay them separately.

5. Your bank sends the funds to the Federal Reserve indicating that the funds are to be credited to the specified account at the Chicago bank.

6. The Federal Reserve debits your bank's Fed account and credits the Chicago bank's Fed account.

7. The Federal Reserve notifies the Chicago bank that their Fed account has been credited with the transfer amount.

8. The Chicago bank debits their Fed account and credits your brother's account with the transfer amount.

9. This is all accomplished within a matter of a few minutes.

10. Once the funds have been credited to the Chicago bank's Federal Reserve account, there is no calling back the wire transfer.  The transfer is considered final.  If you want your money back, you have to call your brother and ask him to send the money back. 

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When a Correspondent Bank is Involved:

YOUR BANK > MEMBER BANK > FEDERAL RESERVE > RECEIVING BANK  

A correspondent bank is one that does not have an account with the Federal Reserve (or a country's Central Bank), but has an association (correspondence) with a bank that does, and maintains an account in that bank.  Banks having accounts at the Federal Reserve are called Member Banks.

For example:

1. You live in Poway, California and want to wire funds to your niece who's attending college in Baton Rouge, Louisiana, and has a savings account at City Bank in downtown Baton Rouge.

2. Your account is at the Poway Town Bank, a small bank owned by a local banking family.

3. The Poway Town Bank doesn't have an account at the Federal Reserve (the Fed), but it maintains an account at Bank of America Main in San Francisco.  Bank of America (BofA) does have an account at the Fed.

4. Poway transfers funds from your account to it's account at BofA Main in San Francisco.

5. BofA debits the Poway Town Bank's account for the transfer amount and forwards it to the BofA account at the Fed.

6. The Fed debits the BofA's Reserve account, credits City Bank's Reserve account, and informs City Bank of the credit.

7. City Bank debits its Fed account and credits your niece's savings account. 

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