SWIFT

SWIFT

SWIFT FOR TRADE

Swift History

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

SWIFT NET Architecture

S A P

It is a Gateway called Swift Access Point.

Individual Users or Local Terminal connect to SWIFT ACCESS POINTS (SAP)‏

SAP Forwards Messages to RP using Swift Transport Network

IRP / ORP

Input Regional Processor (IRP)‏

Control and Validation of all input message

Input Session Number (ISN)‏

Generation of ACKS & NAKS to the users

Output Regional Processor (ORP)‏

Temporarily store output messages

Controls message queuing and delivery

Output Session Number (OSN)‏

Delivery Monitoring

SLICE PROCESSOR (SP)‏

Message Switching

Long term storage

Generation of System Message

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

1. U.S.A
2. Netherlands

SECURITY

SWIFT Security objectives

1. CONFIDENTIALITY

•          Information is disclosed to authorized persons at authorized location only

2. INTEGRITY

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

3. AVAILABILITY

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

4. ACCOUNTABILITY

•          Every individual authorized to use the system is accountable

SWIFT SECURITY

Key Authentication Mechanism

Encryption

Checksum

Swift 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 codes

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 / Authenticity of 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)

Benefits of BKE

Automatically verifies the authenticity of message

Smooth process without human intervention

Cost saved for processing

Processing time reduced

Swift Messages

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

Message 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

Categories of Messages

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

Flow of payment

What is Nostro / Vostro

STP 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 Corresp

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.

Stages in LC Backed Trade

Swift for Documentary Credit

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

MT 760 Guarantee Format Specifications

Thank You

MT 700 LC Format Specifications

MT 700 LC Format Specifications

MT 700 LC Format Specifications

MT 700 LC Format Specifications