SWIFT Financial messages: authentic and universal

The SWIFT financial messages are trusted as the most authentic and universal financial messages worldwide. SWIFT financial message is also the most convenient and fastest medium through which banks can meet customer’s requirements to send and receive messages to and from any country.

Reasons for trusting SWIFT messages by banks and financial institutions:

SWIFT stands for the acronym for Society for Worldwide Interbank Financial Telecommunication. It is a cooperative society formed by the member banks, with its headquarters at La Hulpe, Belgium. The messages are authenticated communication channels between two parties on prior agreement. The messages largely financial are mailed through computer-based mediums.  The advantage of transferring messages in a SWIFT medium is that it does not require separate authentication like a test cipher. The various types of messages are in a prescribed format that must be properly filled up to transmit the message. The fields of SWIFT messages are so structured that the messages are authenticated and universal. The SWIFT messages can be classified into nine categories. They are as follows.

1. Customer Transfer & Cheques
2. Financial Institutions Transfer
3. Confirmations (related to Treasury/Money Markets, foreign exchange & derivatives)
4. Collection & Cash letters
5. Securities
6. Precious Metal & Syndication
7. Documentary Credit & Guarantees.
8. Travellers Cheques
9. Cash Management & Customer Status

The message types 1 to 8 are authenticated messages. These messages are sent to the correspondents of the bank with whom they have a Relationship Management Arrangement (RMA). Message type 9 is unauthenticated which is called free format, which can be sent to any correspondent even if there is no RMA.

Process of transmission of SWIFT messages:

Creation: A message can be created by the user who has been permitted to enter the messages.

Authorisation: Wherever messages are created for payment, the same has to be authorized by an authorized officer of the bank.

Verification: Only payment messages are to be verified by an authorized officer.

Once the messages are authenticated/ verified, the messages will go to the SWIFT server immediately and they cannot modify or stop the messages later on.

Duplicated messages:  Messages related to payments or LC sent through SWIFT are comparable to parting money from the bank’s NOSTRO account. It is very difficult to recover money paid through a duplicated message, more so if it is MT 103 which is a payment message to an individual’s account.

The payment messages are of two types. i. Payments to individuals. ii. Payments to Financial institutions.

MT 103 format is used for payments to individual accounts and MT 202 is used for payments to financial institutions. (MT means Money Transfer).

As a matter of abundant precaution normally sending branch issues the messages in the format 199 /299 respectively for MT 103/MT 202 stating that the message is duplicated and to ignore the second one. Payment acknowledgment bears the notation “Possible Duplicate Emission” (PDE).

SWIFT codes

Swift code is a standard format of Business Identifier Codes (BIC) approved by the International Organization for Standardizations (ISO). Swift code is called by different names like ISO 9362, SWIFT-BIC, BIC code, and SWIFT ID. It is also called as Business Entity Identifier (BEI) when the code is assigned to non-financial institutions.

The SWIFT code will be formatted in 8 or 11 characters, in the following format.

AAAA BB CC DDD

• First 4 letters: Institution Code or bank code.
• Next 2 letters: ISO 3166-1 alpha-2 country code
• Next 2 letters or digits: location code
• Last 3 letters or digits: branch code ((In case of  last 3 digits/letters are ‘XXX’ it means the message is meant for the primary office)

Illustration-1: The SWIFT code CITIINBXBLR can be broken down as under.
CITI is for Bank code-(CITI Bank), IN is for Country code – (India), BX is for Location code – (Location of CITI bank), and BLR is for Branch Code of CITI Bank (Bengaluru branch).

Illustration-2:  SWIFT code IOBAINBB089 can be broken down as under.

IOBA is for Bank Code (Indian Overseas Bank), IN is for country code – (India), BB is for the Location code of IOB, and 089 is for the branch code of IOB (Mumbai Thane).

SWIFT publishes the User Handbook, International BIC Directory, and News-Letter called Swift World.

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