SWIFT

SWIFT

SWIFT is the acronym of worldwide interbank financial telecommunication

History of SWIFT

Increase in International trade and commerce after World War-II

Efficient Banking System for payment mechanism with Security, Reliability and Confidentiality was needed.

Computer and Telecommunication technology came to rescue.
Co-operative organization SWIFT was born
SWIFT is the industry-owned co-operative
Established in 1973
Head quarters at Brussels Belgium
Common language for international financial transactions
Secure, Standardised messaging services
Provides interface software

SWIFT USAGES
Payments
Securities
Treasury
Trade

Why SWIFT

Advantages of SWIFT

It is Highly Secured
It is Highly Reliable
It is very cost effective
It is Standardized – accepted globally

It is a STANDARD SETTER

Offer standardized web based trust service and e-payments to  corporate  customers active in B2B E-commerce

System Control Processor

Controls the entire Network
Organizing Recovery of the Network
Responsible for introduction of New Software online

Two SCP center on SWIFT Network

U.S.A
Netherlands

SECURITY

SWIFT Security objectives

CONFIDENTIALITY
Information is disclosed to authorized persons at authorized location only

INTEGRITY
Information can be RELIED upon ABSOLUTE, ACCURATE and VALID.

AVAILABILITY
Information and the associated services is accessible and usable when needed

ACCOUNTABILITY

Every individual authorized to use the system is accountable

SWIFT SECURITY

Key Authentication Mechanism
Encryption
Checksum

SWIFT BANK IDENTIFICATION CODE (BIC)

BIC stands for Bank Identifier Codes
It is the unique identification code of a particular Bank / Branch

SWIFT handles the registration of these codes

The code is 8 or 11 characters

4 characters – bank code
2 characters – country code
2 characters – location code
3 characters – branch code, optional ( ‘XXX’ for primary office)

Where an 8-digit code is given, you may assume that it refers to the primary office.

BIC is often called SWIFT addresses or code

Examples of BIC

BIC ICICINBB  is for ICICI Bank, Mumbai
ICIC  identifies  ICICI Bank
IN     identifies country code for India
BB    identifies Code for Mumbai
BIC ICICINBB011  is for ICICI Bank, Andheri
011   identifies Code for Andheri Branch

BKE/ AUTHENTICTY MESSAGE

BKE stand for Bilateral Key Exchange
BKE is an essential part of the security of the S.W.I.F.T.  network.
Exchanges secret bilateral authentication keys
Automatically generates code while sending
It also decodes and confirm while receiving
Once BKE relation established within 2 banks they can send and receive authenticated messages between them.

If No BKE present then only MT 999 can be exchanged   (MT 999 Free format Unauthenticated Message)

BENEFIT BKE

Automatically verifies the authenticity of message
Smooth process without human intervention
Cost saved for processing
Processing time reduced

SWIFT MESSAGE

It is a written communication in a structured format
It is not a file
No Attachments can be sent
Message types (MT)‏
SWIFT message as identified by 3 digit number

 Each MT have diff Structure / Use

Message categories   series of MTs relating to a particular class of transaction, as indicated by the first digit of the MT number.

Message Blocks Header, Text , Trailer

SWIFT MESSAGES BLOCKS

Header:

Contains control information
Addressee, processing, priority and security.

Text

Contains the substance of the message.
format and structure varies according to the MT

Trailer

For control purposes, CHK Trailer, PDE Trailer

Category    Details

1    Customer payments and cheques
2    Financial institution transfers
3    Treasury Markets-FX, Money Markets and Derivatives
4    Collection and cash letters
5    Securities Markets
6    Treasury Market- Precious Metals/ Syndications
7    Documentary Credits and Guarantees
8    Travellers Cheques
9    Cash Managements and Customers Status

Structured / Free Format Message

X99 in each category are free format message

(799 is free format message for LC/BG)‏

All other are structured MTs
Structured as per Type and use of Message
Except 999 all other free format MTs are authenticated

MT 110 Scope

Advise of Cheque(s)‏

Sent by a drawer bank, or a bank acting on behalf of the drawer bank to the drawee bank

It is used to advise the drawee bank, or confirm to an enquiring bank, the details concerning the cheque(s) referred to in the message

MT 111 Scope

Request for Stop Payment of a Cheque

This single message type is sent by a drawer bank, or a bank acting on behalf of the drawer bank, to the drawee bank

STOP PAYMENT

Currency Clearing House Process
Funds transferred without any repair
No human intervention
Low cost
Real time payments

ROAD TO STP

Nostro and Currency must match

Ben bank correspondent SWIFT BIC

Ben bank SWIFT BIC or A/c No. with Correspondence

Beneficiary Full A/c No. given

Beneficiary Correct Name Given

Swift structure is strictly followed

Collection MT4xx messages

MT400 : Advice of Payment

MT410 : Acknowledgement

MT412 : Advice of Acceptance

MT 499 : Authenticated free format message for documents sent under collection basis.

MT 734 Scope

This message is sent by the issuing bank to the bank from which it has received documents related to a documentary credit. It may also be sent by the bank nominated to pay/accept/negotiate/incur a deferred payment undertaking to the bank from which it has received documents.

It is used to advise the Receiver that the Sender considers the documents, as they appear on their face, not to be in accordance with the terms and conditions of the credit and that, consequently, it refuses them for the discrepancies stated. The Sender also states that it is holding the documents at the disposal of, or returning them to the Receiver.

MT 740 Scope

This message is sent by the issuing bank to the reimbursing bank.

It is used to request the Receiver to honour claims for reimbursement of payment(s) or negotiation(s) under a documentary credit.

The MT 740 authorises the reimbursing bank to debit the account of the Sender, or one of the Sender’s branches if so indicated, for reimbursements effected in accordance with the instructions in the MT 740.

MT 742 Scope

This message is sent by the paying/negotiating bank to the bank authorised to reimburse the Sender for its payments/negotiations.

It is used to claim reimbursement of payment(s) or negotiation(s) under a documentary credit, as relevant to the reimbursing bank.

Reimbursement Payment

 MT 747 Scope

It is an ammendment to MT740. This message is sent by the bank which has issued an authorisation to reimburse (issuing bank) to the reimbursing bank.

It is used to inform the Receiver about amendments to the terms and conditions of the credit relevant to the authorisation to reimburse.

The amendment is to be considered as part of the authorisation to reimburse.

MT 754 Advice of Payment/Acceptance/Negotiation

This message is sent by the paying, accepting or negotiating bank, or the bank incurring a deferred payment undertaking, to the issuing bank. It may also be sent by the bank to which documents have been presented to a bank that has been nominated to pay/accept.

It is used to advise the Receiver that documents were presented in accordance with the credit terms and are being forwarded as instructed.

MT 756 Advice of Reimbursement or Payment

This message is sent by the issuing bank to the bank from which it has received documents or by the reimbursing bank to the bank from which it has received a reimbursement claim

It is used to advise the Receiver about reimbursement or payment, to that bank, for a drawing under a documentary credit for which no specific reimbursement instructions or payment provisions were provided.

MT 799 Free Format Message

These are authenticated free format messages typically used for L/c and BG cases.

Any messages to be sent under L/C/ BG which are general in nature, or which is used to convey a discrepancy, a MT799 can be sent.

Swift for Bank Guarantees

Below MTs are used for BG

MT      Purpose
760    Issue or request the issue of BG
767    Amendment of BG
768    Acknowledgement of a BG Message
769    Advice of Reduction or Release

MT 760 Guarantee Format Specifications

Status     Tag    Field Name
M    27    Sequence of Total
M    20    Transactions of Reference Number
M    23    Further Identification
O    30    Date
M    40C    Applicable Rules
M    77C    Details of guarantee
O    72    Sender to Receiver information

MT 700 LC Format Specifications

Status  Tag    Field Name
M    27    Sequence of Total
M    40A    Form of Documentary Credit
M    20    D/C Number
M    31C    Date of Issue
M    40E    Applicable Rules
M    31D    Date and Place of Expiry
M    50    Applicant
M    59    Beneficiary
M    32B    Currency Code , Amount
M    39C    Additional Amount Covered
M    41D    Available with…
M    42C    Drafts at….
M    42D    Drawee Bank – Name & Address
M    43P    Partial Shipments
M    43T    Transhipment
M    44E    Port of Loading / Airport of Dep.
M    44F    Port of Discharge / Airport of Desti.
M    44C    Latest Date of Shipment
M    45A    Description of Goods / Services
M    46A    Documents Required
M    47A    Additional Conditions
M    71B    Charges
M    48    Period of Presentation
M    49    Confirmation Instructions
M    53A    Reimbursing Bank
M    78    Instruction to Pay/Acceptance/ Negotiating Bank

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