SWIFT BASICS

Agenda

What is Swift What is BKE / RMA Swift Messages / Categories of messages Structured and Free format messages Payment message in Details Serial and Cover Payments Broadcast Messaging STP / Non STP payments OFAC guidelines.

SWIFT stand for

S W I F
Society for Worldwide Inter Bank Financial

Telecommunication

Swift History

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

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

SWIFT in figures

208+
Countries Connected

12,946,626 Avg Daily Messages 8147+ Live Users

WHY SWIFT

Advantages of SWIFT

It is Highly Secured and Reliable It is very cost effective It is Standardized - accepted globally

It offers standardized web based trust service and e-payments to corporate customers.

WHY SWIFT

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

SECURITY

SWIFT Security objectives

1.

CONFIDENTIALITY

Information is disclosed to authorized persons at authorized location only Information can be RELIED upon ABSOLUTE, ACCURATE and VALID.

2.

INTEGRITY

3.

AVAILABILITY

Information and the associated services is accessible and usable when needed
Every individual authorized to use the system is accountable

4.

ACCOUNTABILITY

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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

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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

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RMA Relationship Management Application

RMA is an essential part of the security of the S.W.I.F.T. network. Previously known as BKE-Bilateral key exchange Exchanges secret bilateral authentication keys Automatically generates code while sending It also decodes and confirm while receiving Once RMA relation established within 2 banks they can send and receive authenticated messages between them.

If No RMA is present then only MT 999 can be exchanged

(MT 999 Free format Unauthenticated Message)

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RMA PROCESS
Yes I give you Permission to send me traffic Iam looking for a correspondent in Bangladesh, Are you interested.?
RMA authorization

RMA answer

RMA query

Bangladesh Krishi Bank

Bank of India

Benefits of RMA

Automatically verifies the authenticity of message Smooth process without human intervention Cost saved for processing Processing time reduced Unilateral traffic. Dates / Time can be defined.

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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 different Structures / Usages

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.

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

8
9

Travelers Cheques
Cash Management & Customer Status

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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

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Structured / Free Format Message

X99 in each category are free format message (Example : 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

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How does the swift alliance look like..?

Payment Messages

MT 103 for Customer fund transfer MT 202 for Bank to bank transfer

MT 110 for Cheques Advise

MT 111 Stop payment of Cheques / Draft

MT192 Stop Payment for MT103

MT292 Stop Payment for MT202

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MT 103 Scope

MT 103 used for Single Customer Credit Transfer

This message type is sent by or on behalf of the financial institution of the ordering customer, directly or through (a) correspondent(s), to the financial institution of the beneficiary customer It is used to convey a funds transfer instruction in which the ordering customer or the beneficiary customer, or both, are non-financial institutions.

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MT 103 Format

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MT 103 Field Specifications

Field 20: Transaction Reference Number PRESENCE is Mandatory Field 23B: Bank Operation Code PRESENCE is Mandatory This field identifies the type of operation. Field 32A: Date/CCY/Amount PRESENCE is Mandatory This field specifies the value date, the CCY and the settlement amount.

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 Field 50a or k: Ordering Customer

PRESENCE is Mandatory This field specifies the customer ordering the transaction

If the account number of the ordering customer is present, it must be stated in Account.

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 Field 57a or d: Account with Institution PRESENCE is Conditional This field identifies the financial institution, which will pay or credit the beneficiary

Field 59: Beneficiary Customer PRESENCE is Mandatory This field specifies the customer which will be paid Accountno.tobeprecededby/

Field 70 : Remittance Information Payment details, Invoice no.,Adv pmt etc.

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 Field 71A: Details of Charges PRESENCE is Mandatory This field specifies which party will bear the charges for the transaction. OUR / SHA / BEN

BEN : All transaction charges are to be borne by the beneficiary customer

OUR : All transaction charges are to be borne by the ordering customer

SHA : Transaction charges on the Sender's side are to be borne by the ordering customer, Transaction charges on the Receiver's side are to be borne by the beneficiary customer.

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Field 72: Sender to Receiver Information

PRESENCE is Optional
This field specifies additional information for the Receiver or other party specified.
Eg;

72:/ACC/Bene acct held with Orchard rd //branch /BNF/Invoice 1234/DHK/16/05

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Screen of MT103

WIFT FORMATTING FOR SENDER TO RECEIVER INFO

/INT/ /ACC/ /BNF/ /REC/

INSTRUCTIONS FOR INTERMEDIARY BANK OR FIELD 56 INSTRUCTIONS FOR ACCOUNT WITH INSTITUTION OR FIELD 57 INSTRUCTIONS FOR BENEFICIARY

OR FIELD 58
INSTRUCTIONS FOR THE RECEIVING BANK

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MAKING A
USD PAYMENT Things to keep in mind

UESTIONS TO BE ASKED WHEN MAKING A PAYMENT

What is the currency of the payment and which correspondent to use ? If USD - which is the payment mechanism to be used ?

Do we have all the routing details to make payment to the beneficiary ?

How do we format the payment with the routing details?

HIPS
Clearing and settlement for USD foreign exchange Subsidiary of the New York Clearing House (NYCHA)

Clearing House Interbank Payment System

56 participating banks and averages 250,000 transactions / day

It is used to effect payments to a beneficiary located anywhere in the world through a member or participant of CHIPS.

HIPS

Clearing House Interbank Payment System: an electronic funds transfer system, operated by the N.Y. Clearing House Association (NYCHA) and member banks. Started operation in 1970 55 participant banks

CHIPS Participant number Every member of CHIPS is assigned a four digit code called the CHIPS Participant number.
Eg : BONY 0001 CITI 0008 HSBC 0108

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EDWIRE IDENTIFIERS

Each participant is assigned a FEDWIRE Number It is a 9 digit number EG : Bank of New York : 021000018

EG : JPMorgan Chase Bank : 021000021

EG : MELLON BANK

: 031000037

WIFT FORMATING Very Important

Option A SWIFT BIC

Option D All other identifiers FORMATING EXAMPLES OPTION A SWIFT BIC 58A: IRVTUS3N OPTION D Identifiers such as a/c number, CHIPS Participant nos. CHIPS UID , Fed routing no. 58D://AC8900548347 OR 58D:/8900548347

58D://CP0001
58D://CH340191 58D://FW021000018

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WIFT Identifiers and their formatting

IDENTIFIER FIELD LENGTH 8-11 charactrs 4 Digits EXAMPLE :56A:IRVTUS3N :58D://CP0001 :58D://CH340828 ICICI BANK Mumbai, India

SWIFT CHIPS CHIPS UID

6 digits

FEDWIRE ROUTING

9 digits

:57D://FW021000018

ACCOUNT NUMBER

varies

:59: /0011050047047 Aveline Andrade ICICI Bank Mumbai, India

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OOK TRANSFERS

Book Transfers are used when both the debit and the credit parties hold accounts with XYZ Bank
There are several advantages : Fast and inexpensive Faster Inquiry resolution Lower compensation charges

Message Type 103 Sample Msg ABA Routing

20:031SMI60714 23B:CRED 32A:070906USD1400,00 50K:/022405123456 TECHNO PVT LTD. A2 LANDMARK, INDIA. 57D://FW123456789 JP MORGAN CHASE BANK CHICAGO ILLONIOIS USA 40034 59:/001801 AIRCRAFT CO. LTD. 70:ADV PAYMENT AGAINST IMPORT 71A:SHA

Message Type 103 Sample Mssg GBP IBAN NO. Routing

20:031SMI60714 23B:CRED 32A:070906GBP1400,00 50K:/022405123456 TECHNO PVT LTD. A2 LANDMARK,MUMBAI, INDIA. 57A:BARCGB22 59:/GB09BARC20671231234567 AIRCRAFT CO. LTD. 70:ADV PAYMENT AGAINST IMPORT 71A:OUR 72:/ACC/SORT CODE 206712 //HAL OF FAME,LONDON // E145 SHP

MT 202 Scope

Message sent to bank with whom we have respective currency nostro

Message is used for Transfer of funds to beneficiarysfinancialinstitution Normally used for bill payments of import collection, LC/BG or Non Import where beneficiary is a bank or financial institution..

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MT 202 Format

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MT 202 Field Specifications

Field 20: Transaction Reference Number

PRESENCE is Mandatory
This field specifies the reference assigned by the sender to identify the message. This field must not start or end with a slash '/' and must not contain two consecutive slashes '//'

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 Field 21: Related Reference

PRESENCE is Mandatory
This field contains a reference to the related transaction

If the Sender is not the originator of the transaction and no related reference is received, the code NONREF must be used in this field.
This field must not start or end with a slash '/' and must not contain two consecutive slashes '//'

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 USAGE RULES
If the related message is an MT 103 Single Customer Credit Transfer, this field will contain the field 20 Sender's Reference of that MT 103.

In all other cases, this field will contain a reference to the related transaction which is meaningful to the beneficiary institution. Eg : MT 400 Advice of Payment.

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 Field 32A: Value Date, Currency Code, Amount

(Date) (Currency) (Amount)

PRESENCE is Mandatory
This field specifies the value date, currency and amount to be transferred. Date must be a valid date expressed as YYMMDD

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 Field 52a: Ordering Institution

PRESENCE is Optional.
This field states the ordering institution when other than the Sender of the message.

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 Field 53a: Sender's Correspondent

PRESENCE is Optional
This field specifies the swift code. account or branch of the Sender or another financial institution through which the Sender will reimburse the Receiver

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 Field 56a: Intermediary

PRESENCE is Optional
This field specifies the party between the Receiver and the account with institution through which the transaction must pass

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 Field 57a: Account With Institution

PRESENCE is Conditional
This field identifies the financial institution, which will pay or credit the beneficiary institution.

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Field 58a or d: Beneficiary Institution

PRESENCE is Mandatory
This field specifies the financial institution which has been designated by the ordering institution as the ultimate recipient of the funds being transferred.

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 Field 72: Sender to Receiver Information This field specifies additional information for the Receiver

Each item of information contained in this field must be preceded by a code which specifically indicates the party for which it is intended.
Codes must be placed between slashes and at the beginning of a line. Additional explanatory information, which may be continued on the next lines, is preceded by a double slash '//'. Narrative text that is not qualified by a code, must start with a double slash '//' on a new line, and, should preferably be the last information in this field.

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WIFT FORMATTING FOR CHARGES

MT202
FIELD 72 : /DEDUCT/ DEDUCT FORMATED THUS INDICATES ALL PROCESSING CHARGES FOR THE BENEFICIARY.

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Screen of MT202

Message Type 202 Sample Mssg.

20: 007MFC404107(Transaction ref no.) 21: 7074406(Related ref) 32A:Value date, Curr code, Amt Date : 23 April 2007 Curr : USD(US Dollar) Amt : #5000,00# 57A:Account with Institution BIC PNBPUS3NNYC WACHOVIA BANK NA NEW YORK, NY USA 58D:Beneficiary Inst name & addr //CH152407 WACHOVIA RCS/COLL DEPARTMENT 72:Sender to Receiver info /DEDUCT/ /BNF/REF:7AQ3451410

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

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

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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

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

Queries

6*35x

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ancellation of payment instructions

Payments are cancelled on a best effort basis

Every request for cancellation of payment instructions MUST be sent via authenticated SWIFT. To cancel a payment sent out on the same day, You are requested to make a telephone call to the nostro agent to prioritize the cancellation. All Calls must be followed by an MTx92, instructing the cancellation.

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STP Payment

Currency Clearing House Process

Funds transferred without any repair No human intervention Low cost.

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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

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electing the Payment Method (Cover)

Ordering Customer Ordering Institution Indian Oil Corp Limited

MT 202

ICICI Bank Ltd

(Receiving Institution)

JP Morgan, New York

MT 103
Beneficiary Bank Emirates Bank Dubai Iranian Offshore Oil Corp, Iran

Beneficiary Customer

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Broadcast Messages
MT074 : This message requests the system to generate a
broadcast message for a list of required users to which the message needs to be sent.

MT094 : This is a response to the (MT074) broadcast

message (auto generated by the system).

Messages are charged 2700 Euros.

To request priority treatment of broadcast request, precede thebroadcasttextwiththefollowingPLSPROCESSTHIS BCTURGENTLY(AllrequestsmarkedasUrgentwillbe billed as urgent)

OFAC
Letter of Credit Office of Foreign Asset Control

What is OFAC and what does it do?

OFAC is a division of the U.S. Treasury which enforces economic and trade sanctions based on U.S. foreign policy and national security goals. Targets are:
Foreign countries that are sanctioned Terrorists International narcotics traffickers Those engaged in the proliferation of weapons of mass destruction

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Background
TheOfficeofForeignAssetsControl(OFAC)oversees the enforcement of federally-mandated economic sanctions against certain foreign governments, financial institutions, and "specially designated nationals" (individuals or companies which have been named as targets of sanctions either due to drug trafficking, terrorism, or some other illegal activity.) The OFAC sanctions are numerous and varied. The actual prohibited transactions or requirements vary, depending upon the sanctions applicable to a particular entity.

Sanction Programs

Anti-Terrorism Sanctions Counter Narcotics trafficking Sanctions Non-proliferation Sanctions Diamond Trading Sanctions

What is SDN?
OFAC publishes a list of Specially Designated Nationals and Blocked Persons SDN List which includes over 3,500 names of companies and individuals who are connected with the sanctions targets and located throughout the world. The list also includes individuals, groups and entities, such as terrorists and narcotics traffickers that are not country specific. US persons are prohibited from dealing with SDNs wherever they are located and all SDN assets are blocked. OFACs website should be check regularly as the list changes frequently.

OFAC SCREENING EXAMPLES

OFAC CURRENT COUNTRY LIST

BURMA (MYANMAR) CUBA SUDAN NORTH KOREA IRAN SYRIA

ELPFUL URLS

OFAC : http://www.treas.gov/offices/eotffc/ofac/
CHIPS : http://www.chips.org/NewUidSearch.php

FEDWIRE : http://www.fedwiredirectory.frb.org/search.cfm
SWIFT : http://www.swift .com/biconline/index.cfm

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Thank You