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 MT760 inter-bank Deal Who Needs SWIFT?Originally, the founders of SWIFT aimed the network at Treasury communications, however, its popularity grew and with this growth, came SWIFT’s customer base. The message’s format allowed for great expansion and allowed SWIFT to now provide to:
Figure 1: An example of a MT760 (Source: SWIFT)
An example of an MT 760 message could include the following:
What happened before Swift?Before SWIFT was used to guarantee Letters of Credit and send information, a system called Telex was used. This was unfortunately hindered by low speeds, multiple security concerns and also no coding system – Transactions had to be described by the senders which were then interpreted by the receiver. Why is MT 760 used in trade?MT 760 can be used either by the party issuing a beneficiary on a guarantee or LOC, or by the party issuing a counter-undertaking to the beneficiary. MT 760 is another type of SWIFT message sent from an issuing bank to an advising bank, with details of the SBLC or bank guarantee. Generally, the MT 799 is subject to the rules of the following:
What are the rules of the MT 760?Often MT 760s reach their maximum size limit, so one or more can be used to extend the size. Additional MT 760s require MT 761s, and up to eight can be sent on top of the original MT 760 to provide the relevant information on the SBLC or Guarantee. It’s important to ensure that duplicate content is not added to supplementary MT 761s (e.g. the Undertaking Amount), and that the information does not conflict with the MT 760. Sequence C (Optional Information) can only be used when Sequence B is for a counter-undertaking for a Guarantee or Letter of Credit. MT 760 CriteriaUnlike the MT 799, the 760 requires much more information regarding the transaction. Information such as:
Potential Issues/ Advancements for SWIFTIn late 2017, SWIFT worked on a proof-of-concept with six major banks which was aiming to discover whether Blockchain technology can help them reconcile their NOSTRO accounts in real time. A NOSTRO account is a bank account that a UK Bank has with a foreign Bank, and it usually is in the currency of that country. The way in which Blockchain constantly updates the logbook owned by every member of the chain provides transparency which SWIFT may look to utilize to increase efficiency in the messaging process. This is an issue SWIFT has. As many of their clients have astronomical transaction volumes, they are difficult to keep up with. Although their capability is far better than Telex, the need for automation in the creation and processing of messages is no secret. Page 2
MT 798 is a multi-bank messaging type which is used for international trade – import, export and standby Letters of Credit.
If you deal with international trade financing through instruments like Bank Guarantees, Documentary Credits, and Letters of Credit (LCs), you may have heard of FIN MT 798, which is a category 7 SWIFT code which supports the processing of bank guarantees and documentary credits between banks around the world. In trade finance, there are several bank-to-bank and corporate-to-bank messaging systems which allow for the flow of information relating to trade finance transactions. MT 799, MT 760 and MT 798 are the three most prolific messaging types for documentary credits, standby Letters of Credit and Bank Guarantees. The following workflow shows a typical messaging service between an applicant and an advising bank, and also the reverse, between a beneficiary and the issuing banks, and where MT 7nn fits in.
SOURCE: SWIFT
What is the format of the MT 798?Depending on the type of transaction (e.g. applying for a documentary credit, issuing an SBLC, or perhaps refusing a Letter of Credit), the format differs, and the sub-messages which are incorporated into the MT 798 will be different. Here’s an example of an application for documentary credit transaction, which includes the index message (essentially the contents of the MT 798), the details messaging and an optional extension message which can incorporate other messaging types.
What is the format of MT 798?Within the MT 798 messaging, there are several sub-messages which can be incorporated into the message. We’ve put a Document together on the format of MT 798 which you can view here:
Download MT 798 Format Types > What information is required by the financial institution?A funder will need to know the name of the advising bank. However, they will request more granular detail, such as the LC Number and LC Amount. This will also include the tenor or length of the draft. This will be alongside the latest date of shipment. The company that is liable for the confirmation fee needs to be known; along with information on what the products are being traded, location, port, unloading location and whether the LC is restricted for negotiation or not. Some of the information for an MT 798, required by a financial institution include:
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Messaging Type 799 by SWIFT
MT799 is an essential part of international trade; a ‘free format message’ sent between banks which confirms funds or proof of deposits on a potential trade. MT799 allows banks to communicate between each other freely through the SWIFT system, rather than being a mechanism for transferring funds or paying.
If you deal with Bank Guarantees, Documentary Credits, and Letters of Credit (LCs), you may have heard the term ‘MT799’ being used. A SWIFT code (also commonly referred to as SWIFTBIC) is a unique identifier which banks use to identify and send money to overseas banks. A SWIFT Code for a bank is identifiable by a series of letters and numbers, as shown in the diagram below:
What is the format of MT 799?
‘MT nnn’ stands for Message Type Number: MT 799 messages must include a ‘Transaction Reference Number’ which can contain 16 characters in that field, and a ‘Narrative’ which provides a brief description of a transaction. In the case of the reference number, this field must not start or end with a slash ‘/’ and must not contain two consecutive slashes ‘//’, or it will throw up the error code: T26. With the Narrative, there are no ‘Network Validated Rules’ for MT 799.
Example of an MT 799?
How do I start the MT 799 process?Banks do not like issuing these automated messages (MT 799), as they fear being liable for the cost of the trade. There is usually a requirement for the bank’s client to post a specific level of collateral. What information is required by the financial institution?A funder will need to know the name of the advising bank. However, they will request more granular detail, such as the LC Number and LC Amount. This will also include the tenor or length of the draft. This will be alongside the latest date of shipment. The company that is liable for the confirmation fee needs to be known; along with information on what products are being traded, location, port, unloading location and whether the LC is restricted for negotiation or not.
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