What Is a Third-Party Transaction?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 17 September 2019
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A third-party transaction is a type of business transaction in which the dealings between the buyer and the seller are managed through an intermediary or third party. This third party may be involved in crafting the particulars of the deal, or serve as the means of receiving a payment from a buyer and forwarding that payment to the seller. The use of a third-party transaction is common in a number of business deals, including mortgage financing and even the remittance of payment for services rendered through some sort of online payment portal.

One of the more common examples of a third-party transaction has to do with mortgage brokering. In this scenario, the broker will attempt to match the needs of a potential home buyer with the loan programs offered by a lender. The idea is to create a connection between the buyer and seller that works to the benefit of all parties concerned. In the best of circumstances, the buyer is able to work through the broker to secure a mortgage with rates and terms that are agreeable, while the seller works through the broker to gain a new client. The broker benefits from the successful execution of the deal by receiving some sort of compensation, usually in the form of a commission.


The use of an online payment portal is also an example of a third-party transaction that has become increasingly common since the advent of the Internet. With this type of activity, a buyer can submit a payment for some type of good or service that is rendered. That payment is received by the third-party provider operating the payment portal, the proceeds verified and deducted from the buyer’s account, then forwarded to the seller’s account. From there, the seller is free to withdraw the amount of the payment by way of transferring it to a bank account using a debit card provided by the payment portal to withdraw the funds with the aid of an automatic teller machine.

Whenever there is some sort of intermediary involved in a transaction between a buyer and seller, that activity can rightly be referred to as a third-party transaction. This includes situations in which the intermediaries work to secure services or goods for a buyer, advocate the products offered by a seller, or just function as the avenue for a payment from a buyer to a seller to be processed. In just about every case, the third party involved in the transaction will receive some sort of compensation, either in the form of a flat rate or fee or a percentage of the total value of the transaction.


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How does the third party payment come under money laundering act? Is it money laundering if any Indian company pays on behalf of a foreign company?

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