Virtual IBAN

A virtual IBAN has the same parts as any IBAN: a country code, two check digits and the bank and account identifiers, up to 34 characters in all, as ClearBank explains. The payer cannot tell it apart from a real one. Behind it sits a master account, often with thousands of virtual IBANs pointing to it. According to the product page of Memo Bank, a virtual IBAN has no balance of its own, the company creates it in the banking app or through the bank's API, and it can switch it off without changing the details of the main account. A platform can therefore open a new virtual IBAN for each customer automatically at signup.

A virtual account and a virtual IBAN are not the same thing. A virtual account is a sub-ledger inside the bank's or the company's books and usually cannot receive a payment from an outside sender. A virtual IBAN can, because it is an IBAN that payers can use.

The main use is reconciliation. If each customer gets its own virtual IBAN, every incoming transfer is matched to that customer by the account number alone, without reading the remittance text, as the Corefy glossary describes for payment service providers and their merchants. Groups use the same technique to collect for several subsidiaries into one central account, the collections-on-behalf-of model described on the payment factory page, and to separate funds by project or unit without extra accounts. Most providers build virtual IBANs for SEPA payments, and transfers in other currencies need checking with the bank.

The European Banking Authority found in its report on virtual IBANs that EU law had no common definition of them and that the end users of a virtual IBAN may be unknown to the institution holding the master account. That weakens transaction monitoring. The new EU anti-money laundering regulation, Regulation (EU) 2024/1624, defines virtual IBANs for the first time and requires the institution servicing the master account to be able to obtain information on the end users.

Germany acted earlier. Since a BaFin general ruling of 2020, a German bank that issues IBANs with the DE country code to payment service providers for their customers must record those end customers in the account register it keeps for the authorities. In its interview "Virtual IBANs can be Trojan horses" and a supervisory notice published with it, BaFin warns that some multi-step virtual IBAN structures raise the risk of money laundering, including underground banking, and expects banks and payment institutions to adjust their due diligence and monitoring until the EU regulation applies on July 10, 2027.

Finance Loop is the meeting place for treasurers, payment institutions and the compliance teams who decide how virtual IBANs may be used. It connects the finance, IT and AI communities in Germany, Austria and Switzerland, with events in Frankfurt, Munich, Berlin and Hamburg.

Finance Loop supports When Banks Say 'No', a half-day payments seminar in Frankfurt for compliance, treasury, finance, export and legal teams on blocked payments, de-risking and sanctions. Finance Loop is also media partner of Capital & Code, a Frankfurt conference whose audience includes corporate treasurers who manage liquidity and risk.

A virtual IBAN is an IBAN that routes incoming payments to a master account instead of to an account of its own. It identifies the customer, unit or purpose a payment belongs to.

No. It has no balance and no account agreement of its own. The money sits on the master account, and the bank that holds the master account is responsible for knowing whose money it is.

Yes. A German bank that issues virtual IBANs must record the end customers in its account register for the authorities, and BaFin expects it to check the money laundering risk of the whole virtual IBAN model.

A virtual account is an internal sub-ledger and usually cannot receive payments from outside. A virtual IBAN can receive transfers and direct debits like any IBAN, while the money lands on a master account.