SWIFT at a glance
SWIFT HISTORY
> 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
- SWIFT in figures
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
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 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 110 FORMAT
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
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 |