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Pass-Through Deposit Insurance: When an App or Intermediary Holds Your Money

Money placed through an app, broker, or other intermediary can reach an insured bank without every part of the arrangement becoming insured. Pass-through coverage depends on ownership, account records, and other requirements, while the intermediary's own failure presents a separate problem. This guide explains how the FDIC evaluates these arrangements and why a claim that funds are held at a partner bank needs further detail. It connects the legal recordkeeping rules with everyday app-based banking decisions.

Adapted from public-domain educational material published by FDIC. Fynoptic has organized and edited the material and added introductory and practical guidance. Sources were reviewed on October 28, 2026; original publication dates, where available, are listed below.

Pass-through Deposit Insurance Coverage

Pass-through Deposit Insurance Coverage (12 C.F.R. § 330.5; 12 C.F.R. § 330.7)

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I. Definition

“Pass-through” deposit insurance is a method of insuring depositors whose funds are placed and held at an FDIC-insured bank through a third party. Pass-through insurance is not a separate ownership category or ownership type. Pass-through refers to arrangements through which deposit accounts are established by a third party for the benefit of one or more other parties, also known as principals. The deposit account can be established for the benefit of a single owner or it can be a commingled account where deposits from multiple principals are deposited in the same account.

II. Common Pass-through Arrangements

Common pass-through arrangements include, but are not limited to:

  • Parent acting as guardian for a minor child (e.g., "Uniform Transfer to Minors" or (UTMA) or “Uniform Gifts to Minors" (UGMA))
  • Lawyer or law firm holding client funds (IOLTA)
  • Executors, estate administrators, or other similar roles
  • Decedent estate accounts
  • Agents, custodians, nominees, trustees (other than trustees of revocable or irrevocable trusts), or fiduciaries
  • Companies that offer financial products or services through partnerships or arrangements with FDIC-insured banks
  • Brokers who offer brokered CDs
  • Companies that place their customers’ funds into different banks to help customers maximize their deposit insurance coverage

The third party in these arrangements may be referred to in account agreements and other documents as a fiduciary, custodian, agent, trustee, guardian, or similar term. Some of these terms have specific legal meanings in other contexts, but for purposes of pass-through insurance, the concept is that there is a person or entity depositing funds at an FDIC-insured bank on behalf of the actual owner of the funds.

Accounts with pass-through deposit insurance coverage are not insured as a separate ownership category. The deposit insurance coverage for such accounts depends on the actual ownership category in which the principal or owner holds the funds. For example, ABC Brokerage Firm established a single account for Lisa Johnson at AnyTown Bank.

In this scenario, Lisa Johnson is the owner of the funds and her account would be added with any other single accounts she has at AnyTown Bank and insured as her single account for up to $250,000.

In other words, assuming Lisa has other single accounts at AnyTown Bank, she does not receive separate coverage simply because the brokerage firm opened one of the accounts. However, assuming the requirements discussed below are met, coverage is provided as though the actual owner (Lisa, in this example) directly opened the account at the insured bank. Note that if the pass-through insurance requirements are not satisfied, the deposits will be combined with all other deposits in the broker’s name, and insured to the broker for up to $250,000.

III. Requirements

The FDIC reviews potential pass-through arrangements at the time the insured bank fails to determine if the requirements for pass-through insurance are satisfied. Deposits held by a third party on behalf of one or more principals are insured on a pass-through basis as the deposits of the principal (the actual owner) to the same extent as if the deposits were deposited directly by the principal only if all of the following three requirements are met:

  1. Funds must be in fact owned by the principal and not by the third party who set up the account (i.e., the fiduciary or custodian who is placing the funds). To confirm the actual ownership of the deposited funds, the FDIC may review:
    1. The agreement between the third party establishing the account and the principal
    2. Applicable state law
  2. The insured bank's account records must indicate the agency nature of the account (e.g., XYZ Company as Custodian for employees, XYZ for the benefit of (FBO) customers, Jane Doe UTMA John Smith, Jr.).

Note that in some instances, an account might be titled in the name of the insured bank itself while reflecting that it is held for benefit of another party (e.g., AnyTown Bank FBO XYZ Company Customers).

  1. The records of the insured bank, third party depositing the funds, or another third party in the usual course of business must indicate both the identities of the principals as well as their ownership interests in the deposit. Note that the third party does not have an ownership interest in the deposit.

If all of these requirements are not satisfied, the deposits will be insured to the named account owner (typically the third party), aggregated with any other funds that the third party holds at the same bank in the same deposit insurance category. This could result in uninsured deposits.

The first requirement above will not be satisfied if the third party depositing the funds has entered into a debtor/creditor relationship with the purported owner as opposed to an agent/principal relationship. The creation of a debtor/creditor relationship may occur if the purported agent has changed the terms of the insured bank’s deposit contract, such as the terms relating to maturity dates or interest rates. For example, if a customer of a deposit broker is promised by the third party that he or she will earn 3% on his or her deposit when the insured bank is paying only 2%, the third party would be a debtor with an independent obligation to pay 3%.

In such a scenario, the deposits at the insured bank would not be eligible for pass-through coverage to the customers. Rather, the deposits would be treated as corporate deposits belonging to the third party.

The scenario above (in which the third party pays interest in excess of the interest paid by the insured bank) should be contrasted with scenarios in which a third party retains the interest (or a portion of the interest) paid by the insured bank as the agent’s fee. In the latter scenario, pass-through coverage is possible because the agent does not assume independent debt obligations. Of course, the agent should disclose the existence of all such fees to its customers.

IV. Requirements for Multi-Tier Pass-Through Arrangements

Accounts utilizing pass-through insurance may involve multiple levels of relationships. For example, one agent may hold deposits as nominee for another agent who in turn holds the deposits as an agent for a third party, who in turn is an agent for a fourth party. For deposit accounts that involve multiple levels of relationships, there are two ways to satisfy the FDIC's disclosure rules:

Option 1:

  1. Indicate on the deposit account records the existence of each and every level of the relationship; and
  2. Identify, at each level, the name and interests of the entity on whose behalf the party at each level is acting.

Option 2:

  1. Indicate on the deposit account records that the depositor is acting on behalf of certain persons or entities who may, in turn, be acting in a capacity for others; and
  2. Indicate the existence of additional levels of relationships in records maintained in good faith and in the normal course of business by parties at subsequent levels; and
  3. Indicate at each of the levels the names and interests of the persons on whose behalf the party at that level is acting.

No person or entity in the chain of parties will be permitted to claim that they are acting on behalf of others unless the possible existence of such a relationship is revealed at some previous level in the chain.

V. Aggregation of Deposits

Pass-through is not a separate ownership category. As detailed in this section, accounts held by a third party, provided all the requirements are met, are insured based on the actual ownership of the funds. Therefore, deposits held through a pass-through arrangement are added to a depositor’s other accounts in the same ownership category at the same insured bank.

The manner in which the funds are deposited, whether directly by the actual owner or through a third party, does not affect aggregation. In other words, since accounts involving pass-through arrangements are not a separate ownership category, deposit insurance coverage is determined based on the ownership category in which the funds are held. For example, if a fiduciary, such as a broker, has opened a single account on behalf of Barry Richards in XYZ Bank and Barry Richards directly opens another single account directly with XYZ Bank, both of these deposits are combined and insured for up to $250,000.

VI. Failure to Meet Requirements

If the ownership, disclosure, and recordkeeping requirements discussed in this section are not met, the accounts will be insured as the deposits of the named account holder in either the Single Accounts or Business/Organization Accounts category. These deposits will then be added to any other deposits the third party may hold in the same ownership category at the same insured bank, and the total will be insured for up to $250,000.

For more information on how pass-through deposit insurance coverage works, including accounts opened by insured banks when acting in a fiduciary capacity, please review FDIC Financial Institution Letter FIL-29-2010, Guidance on Deposit Placement and Collection Activities. For more information on how the FDIC processes brokered deposits when an insured bank fails, please refer to the FDIC’s Deposit Broker’s Processing Guide.

Banking With Third-Party Apps

What to know about fintech, banking relationships, and deposit insurance

Technology has continued to transform the business of banking in recent years. Traditionally, consumers opened deposit accounts directly with banks (whether in-person, on the bank’s website, or through the bank’s mobile app). The easiest way for most consumers to have confidence that their money is safe continues to be opening an account directly with insured depository institutions, like FDIC-insured banks and savings associations.

Increasingly, some consumers are choosing to open accounts through nonbank companies (typically online or through mobile apps), such as technology companies providing financial services (often referred to as fintech companies), that may or may not have business relationships with banks. If and how a bank is involved is key to understanding whether or not your money is protected by deposit insurance. However, in some cases, it is not always clear to consumers if they are dealing directly with an FDIC-insured bank or with a nonbank company.

FDIC deposit insurance coverage

If you open a deposit account directly with an FDIC-insured bank, you are insured for up to at least $250,000 by the FDIC, which is backed by the full faith and credit of the United States government.

Most banks offer online and mobile banking options, in addition to having branches, giving you the ability to conduct your banking at a branch or while you are at home or on the go. Online or in person, bank customers with deposits at FDIC-insured banks benefit from deposit insurance coverage.

Nonbank companies

But what if you open an account with a nonbank company that says it will deposit your money in an FDIC-insured bank? Will you be eligible for FDIC deposit insurance coverage? The short answer is: it depends.

It is important to be aware that nonbank companies themselves are never FDIC-insured. Even if they claim to work with FDIC-insured banks, funds you send to a nonbank company are not eligible for FDIC insurance until the company deposits them in an FDIC-insured bank and after other conditions are met. If the nonbank company deposited your funds in a bank, then, in the unlikely event of the bank’s failure, you may be eligible for what is referred to as “pass-through” FDIC-deposit insurance coverage. However, the nonbank company must take certain actions for your funds to be eligible for FDIC insurance.

For example, after the nonbank places your funds on deposit at a bank, records must be kept to identify who owns the money and the specific amount that each person owns. Ownership of the money is important and is typically determined by the applicable deposit account agreements and state law. There are other requirements as well. It is important to make sure you read the disclosures and terms of service carefully to understand if the account may be eligible for FDIC insurance.

However, FDIC deposit insurance does not protect against the insolvency or bankruptcy of a nonbank company. In such cases, while consumers may be able to recover some or all of their funds through an insolvency or bankruptcy proceeding, often handled by a court, such recovery may take some time. As a result, you may want to be particularly careful about where you place your funds, especially money that you rely on to meet your regular day-to-day living expenses.

Nonbank companies, including fintechs, may offer a variety of financial products and services. They may or may not offer access to deposit products at banks that are FDIC-insured. If a nonbank company claims to offer access to products that it states are FDIC-insured, you should identify the specific FDIC-insured bank or banks where they say they will deposit your funds. You can confirm that the bank they claim to be working with is FDIC-insured using BankFind. If technology glitches happen with the services provided by a nonbank company, such as at its app or website, you may experience error messages, slow response times, or site crashes that temporarily impede access to your accounts or other mobile banking services. Be sure to contact the nonbank company’s customer service as soon as possible to help resolve the issue.

How can I avoid fake banks and apps?

You should be aware of the potential for scams and be vigilant about protecting your money. Scammers often create fake websites that are so similar to bank websites, they can easily trick consumers into providing personal information or money. Scammers have also developed fake apps that contain malware. When you download the app, the malware steals personal information from your device or locks it, holding it for ransom until you pay the scammers. Be careful of apps or websites that ask for suspicious permissions, such as granting access to your contacts, text messages, stored passwords, or credit card information.

To determine whether you are dealing with an FDIC-insured bank and check whether the URL is in the FDIC’s records, you can use our BankFind tool. Because many FDIC-insured banks have provided URLs for their websites, if a website is listed in the FDIC’s records then you can be more confident that it is run by a bank. You can also contact the FDIC at 877-ASK-FDIC (877-275-3342) from 8:00 am to 6:00 pm ET Monday through Friday, or 8:00 am to 1:00 pm ET Saturday, to report a suspected scam.

In addition, you can call an FDIC deposit insurance expert at 1-877-ASK-FDIC or email the FDIC through our website, ask.fdic.gov. FDIC deposit insurance experts are happy to help confirm whether or not you are dealing with an FDIC-insured bank and assist you with any deposit insurance-related questions.

It is important to understand who you are dealing with before turning your money over or sharing personal information. If you send money to a scammer or fraudster, it may be difficult or impossible to recover your money. Knowing the characteristics of impostor scams and fake bank websites and apps can help you avoid becoming a victim.

FDIC Fintech: A Bridge to Economic Inclusion

FDIC Fact Sheet: What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies

FDIC: Understanding Deposit Insurance

FDIC: Are My Deposits Insured by the FDIC?

FDIC: Electronic Deposit Insurance Estimate (EDIE)

Consumer Financial Protection Bureau (CFPB): Finds that Billions of Dollars Stored on Popular Payment Apps May Lack Federal Insurance

Putting this into practice

Identify the actual insured bank, who owns the deposited funds, and how your interest is recorded. Include your other deposits at that bank when checking limits. Also ask how you would access the money if the intermediary stopped operating while the bank remained open.

Sources and further reading

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