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SWIFT FOR TRADE

September 2007, Bangladesh. SWIFT FOR TRADE. Contents. What is Swift What is BKE Swift Message / Categories of messages Structured and Free format messages Payment message in Details STP / Non STP payments LC / BG related Messages. SWIFT stand for. S. Society for. W. Worldwide. I.

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SWIFT FOR TRADE

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  1. September 2007, Bangladesh. SWIFT FOR TRADE

  2. Contents What is Swift What is BKE Swift Message / Categories of messages Structured and Free format messages Payment message in Details STP / Non STP payments LC / BG related Messages

  3. SWIFT stand for S Society for W Worldwide I Inter Bank F Financial T Telecommunication

  4. 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 History

  5. 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

  6. Swift Usages Payments Securities Treasury Trade

  7. SWIFT in figures 208+ Countries Connected 12,946,626Avg Daily Messages 8147+ Live Users

  8. 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

  9. WHY SWIFT Disadvantages of TELEX Insecure Transaction Slower transmission Susceptible to transmission errors Expensive Most transacting Bank is a SWIFT user and not having test key arrangement for TELEX

  10. SWIFT NET Architecture

  11. SCP SWIFT TRANSPORT NETWORK SP SP SP SLICE PROCESSOR SWIFT TRANSPORT NETWORK RP2 RP3 RP4 RP1 REGIONAL PROCESSOR SWIFT TRANSPORT NETWORK SWIFT ACCESS POINT SAP SAP LTs USERS

  12. 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

  13. 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

  14. SLICE PROCESSOR (SP)‏ Message Switching Long term storage Generation of System Message

  15. 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

  16. PC CONFIGURATION – STANDALONE S W I F T COMMUNICATION LINK SWIFT INTERFACE PC PC CONNECT

  17. CONFIGURATION – LAN COMMUNICATION LINK S W I F T PC STAND. STN. COMMUNICATION STATION / Server PC STAND. STN. SWIFTINTERFACE PC PC

  18. 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

  19. SWIFT SECURITY Key Authentication Mechanism Encryption Checksum

  20. 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

  21. 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 ICICINBB011is for ICICI Bank, Andheri 011 identifies Code for Andheri Branch

  22. 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)

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

  24. 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

  25. 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

  26. Categories of Messages Category Details 1 Customer Payments and Cheques 2 Financial Institution Transfers 3 Treasury Markets – Fx, Money Market and Derivatives 4 Collection & Cash Letters 5 Securities Markets 6 Treasury Markets - Precious Metals / Syndications 7 Documentary Credits & Guarantees 8 Travelers Cheques 9 Cash Management & Customer Status

  27. 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

  28. 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

  29. Field No. Field Name Status Content / options 20: Senders ref No. M 16x 53A: Senders Correspondent O A, B or D 54A: Receivers Correspondent O A, B or D 72: Sender to receiver information O 6*35x 21: Cheque Number M 16x 30: Date of issue M 6n 32A: Cur code/Amount M 3a,15d 52A: Drawee Bank O A, B or D 59: Payee / Beneficiary M [/34x]4*35x MT 110 Format

  30. 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

  31. Field No. Field Name Status Content / options 20: Senders ref No. M 16x 21: Cheque Number M 16x 30: Date of issue M 6n 32A: Cur code/Amount M 3a,15d 52A: Drawee Bank O A, B or D 59: Payee / Beneficiary O [/34x]4*35x 75: Queries O 6*35x MT 111 Format

  32. Flow of payment Ordering Customer(50K)‏ Sender (Header)‏ Receiver (Nostro Account)‏ Ben. Bank Nostro (56A:)‏ Ben Bank (57a:)‏ Beneficiary (59)‏

  33. What is Nostro / Vostro An account that a Bank holds with a foreign Bank Nostro An account of foreign Bank held with us Vostro

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

  35. 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

  36. 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.

  37. Stages in LC Backed Trade Issue of DC and Amendment Shipment of Goods/ Presentation of documents Discrepancy / Acceptance of Documents Payment of Documents

  38. Swift for Documentary Credit MT Purpose 700 Issue of a DC 701 Issue of a DC continuation of MT 700 707 Amendment to a Documentary Credit 710 Advice of a Third Bank's DC 711 Adv of Third Bank’s DC MT 710 continuation 730 Acknowledgement 734 Advice of Refusal 740 Authorisation to Reimburse (Issuing Bk)‏ 742 Reimbursement Claim (Claiming bank)‏ 747 Amendment to MT 740 752 Authorisation to Pay, Accept or Negotiate Below MTs are used for DC

  39. 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.

  40. 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.

  41. 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.

  42. Reimbursement Payment Reimbursing Bank MT 740 MT 742 Payment A/c Dr Issuing Bank Negotiating Bank

  43. 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.

  44. 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.

  45. 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.

  46. 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.

  47. Swift for Bank Guarantees MT Purpose 760 Issue or request the issue of BG 767 Amendment to BG 768 Acknowledgement of a BG Message 769 Advice of Reduction or Release Below MTs are used for BG

  48. MT 760 Guarantee Format Specifications

  49. Thank You

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