24 February 2024

What is S.W.I.F.T. ?

 The acronym stands for Society for

Worldwide Interbank Financial
Telecommunication (a cooperative society).

 Its headquarters are situated in La Hulpe,

on the outskirts of Brussels

 S.W.I.F.T. was formed when seven Major

International Banks met to discuss the
limitations of Telex as a means of secure
delivery of payment and confirmation
information

SWIFT Services

 SWIFT provide a network that enables Financial

institution worldwide to send & receive information
about financial transactions in a secure, standardize
and reliable environment.
 SWIFT also sells SW & services to Financial institution
 It is a messaging network, does not do any fund transfer
 No clearing or settlement by SWIFT, no account held
 It is also registration authority of several ISO standards
like ISO9362, ISO10383, ISO13616, ISO15022, ISO20022
 It has 3 DC – US, Netherland & Switzerland

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SWIFT Softwares

 SWIFTNET & Relationship Mgmt Application

 SWIFT Network Link (SNL)
 SWIFT Alliance Gateway (SAG)
 SWIFT Alliance Access (SAA)
 Alliance Messaging Hub (AMH)
 SWIFT Alliance Work station (SAW)
 SWIFT Alliance Messenger (SAM)
 SWIFT Alliance Web Platform (SWP)
 Remote Access Host Adapter (RAHA)

Importance of Swift

 Most commercial payments are made by an

account transfer. That is, the payer transfers an
amount from its account at its bank to the payee's
account at the payee's bank. The transfer may
need to pass through one or more intermediary
banks if the payer’s bank and the payee's bank do
not have a direct correspondent relationship.
 Most high-value domestic and international
payments are made by credit transfer through
electronic message systems such as the Society for
Worldwide Interbank Financial Telecommunication
(SWIFT), and through national high-value credit-
transfer systems such as Fedwire, CHIPS, CHAPS,
BOJ-NET, RTGS, NEFT, IMPS etc.

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Swift-operations

 Swift is a communication system , but not a

settlement system like RTGS , or Clearing house.
 In case we receive a swift message from a non-
correspondent bank ( e.g. Barclays bank or BNP
Paribas in USD , we cannot act without verification
of credit in our USD correspondent account e.g.
New York Branch)
 In case where we maintain a account with a bank
and receive a swift message like MT 103(Customer
payment message), we can act, as swift message
from correspondent can be treated as settlement
message
 Bank’s reconciliation dept. at Treasury has to
verify and reconcile the credit entry in the
correspondent account .

SWIFT- CODING

 SWIFT CODE : a SWIFT code consists of 8 or 11 characters

made up of
 Following :
 4 characters – bank code : BARB – Bank of Baroda
 2 characters- Country code- IN - India, US- USA, AE- UAE
 2 Characters- location code- BB- Mumbai, 33- New York, AD-
Dubai
(if the second characters is 1 , then it denotes a passive
participant in the SWIFT Network)
 3 characters- branch code, optional (‘XXX’ for primary
office) (letters and digits) – BARBINBBXXX, BARBINBBAHM
 Where an 8 –character code is given , it may be assumed
that it refers to the primary office.

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Top Remittance Receiving

Countries 2014 US$ billion
India 89
China 67
Mexico 27.6
Philippines 24.3
France 18.9
Germany 13.6
Bangladesh 12.6
Belgium 11.9
Spain 11.2
Nigeria 11

Top Remittance-Sending
Countries US$ billion
United States 67.7
Saudi Arabia 37
Switzerland 25.6
21.4
Germany 16.8
Italy 14.2
Spain 13.9
Luxembourg 12.6
Kuwait 10.9
Netherlands 9.7

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Who uses SWIFT?

Currently the following categories of organisation can access the service:

 Banks
 Trading Institutions
 Money Brokers
 Securities Broker Dealers
 Investment Management Institutions
 Clearing Systems and Central Depositories
 Recognised Exchanges
 Trust and Fiduciary Service Companies
 Subsidiary Providers of Custody and Nominees
 Treasury Counterparties
 Treasury ETC Service Providers

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Types of Swift Messages-

Swift Series
1 – MT 100 series :Customer Transfers and Cheques
2 – MT 200 series: Financial Institution Transfers
3 – MT 300 Series: Treasury Markets
4 – MT 400 series: Collection & Cash Letters
5 – MT 500 series: Securities
6 –MT 600 series: Precious Metals and Syndications
7 – MT 700 series: Documentary Credits / Guarantees
8 – MT 800 series: Travellers Cheques
9 – MT 900 series: Cash Management & Customer
Status
0 - System Messages

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Guarantee
MT760 : Guarantee / Standby Letter of Credit : This
message is sent between banks involved in the issuance
of a guarantee and is used to issue a guarantee or to
request the Receiver to issue a guarantee. This
message may also be used for Standby Letters of Credit.

- MT767 : Guarantee / Standby Letter of Credit

Amendment : This message is sent by a bank which has
issued a guarantee to the bank to which the guarantee
was issued and is used to amend or request the
amendment of the guarantee. This message may also
be used for Standby Letters of Credit.
- MT 769: Release of Liability from Guarantee : This
message is sent by the Receiver bank to release the
issuing Bank of its liability from Guarantee.

Customer Transfers :MT

103:Participants
 Applicant ( Originator) : Field 50
 Remitting Bank : Ordering Institution : Field 52
 Senders correspondent – Field 53 (In the header of the messages when
we send to our correspondent bank , e.g. BARBUS33XXX)
 Receivers correspondent/ Intermediary Bank in USA : Field 56 in case of
US dollar payment ; field 54 in case of Euro payment ..
 Do not use field 54 in US dollar payment.
 Beneficiary bank where the beneficiary maintains account : Field 57
 Beneficiary : Field 59
 Field 70 : Remittance information
 Banks collect payment / charges for the service from the sender as well
as from the recipient of funds. The sender bank typically collects a fee
from the sender separate from the funds being transferred , while the
receiving bank and intermediary banks through which the transfer
travels deduct fee from the money being transferred so that the
recipient receives less than when the sender sent.

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SWIFT Platform performance

 19 million messages processed daily on

average
 21 million messages process in a peak
days
 5+ billion message processed in 2013
0 message lost since inception

99.999 uptime

MT – Category 7, 8 & 9
7 – Documentary Credits / Guarantees – These are exchanged
between banks involved in the documentary credit and
guarantee business. –
MT700 – Issue of a Documentary Credit;
MT707 – amendment to a Documentary Credit;
MT730 – Acknowledgement, MT760 – Issue of Guarantee,
MT 767 – Amendment to a Guarantee
8 – Travellers Cheques – These are issued between issuers and
remitting agents, selling agents, and refund agents in the handling
of Travellers Cheques.
9 – Cash management & customer Status – These messages are
exchanged between financial institutions, either on behalf of
themselves, other financial institutions, or customers. These are:
balance reporting messages, netting messages, status messages.
MT900 – Confirmation of Debit; MT910 - Confirmation of Credit;
MT950 – Statement Message

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Letter of credit -MT 700

 EXPORT LETTERS OF CREDITCOMMUNICATION AND PAYMENT
Letters of credit in favuor of exporters are usually sent by SWIFT and in a
prescribed format. A SWIFT format indicates the issuing bank at the top
(“received from”) and has numbers at the left for specific information
such as:

 Field details :
40 A: Form of LC : Irrevocable
20 : Reference
31C: date credit issued
40E : Applicable Rules : UCP latest version
31D: Date and Place of expiry
50: order customer (account party)
59: beneficiary (the exporter - usually customer of the bank)
32B : Currency code , Amount
39B: Maximum Credit Amount (+5% if no specific mention)
41D: available “by payment” or “by negotiation”
42C: tenor of drafts
42D: bank on which drafts are drawn

Letter of credit MT 700

43P : Partial Shipment (Permitted/Not permitted)
43T : Transhipment
44E: shipping dispatch point: place of export
44F: shipping destination point: place of import
44C: latest shipping date (year/month/day)
45A: goods being shipped and terms of trade (FOB, CIF, etc.)
46A: documents required to draw under letter of credit
47A: additional conditions: this is often where it mentions if TT
reimbursement is acceptable (“TT” means tested
teletransmission)
48: period for presentation of documents (if silent, 21 day
maximum after shipping date on bill of lading, but within expiry
date; see UCP500, 43a)

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