A client segregated bank account is an account whose sole purpose is to hold client funds for transactional purposes. Client accounts cannot be accessed by third parties and are separate from the account belonging to the company to whom the funds are transferred.
The objective of these accounts is to safeguard clients’ deposits in the event that the company incurs financial or liquidity problems, as they provide full assurance that the funds can never be misappropriated.
International companies using Fintechs or other financial intermediaries to manage exchange rate risk may have client bank accounts for their foreign currency trading operations.
For example: Company A provides a foreign exchange service. Once a client processes a transaction with Company A, the client’s funds are transferred to a client account before the transaction is completed. These funds would not be affected if Company A were to become insolvent, as they are safely secured in the client bank account.