Swifts
How does cash move from one party to the other? This is through a SWIFT message.
SWIFT is an abbreviation for Society for WorldWide International Financial Telecommunication.
This organization operates a worldwide financial messaging network. Messages are securely and reliable exchanged between banks and other financial institutions. The majority of the international interbank messages use the SWIFT network.
During the settlement process, when there is a situation wherein the counterparty claims that they have paid the funds, but we do not see that hitting our account, we would have to ask the counterparty for the SWIFT. On receipt of the same, we would have to check if they funds have been paid to the right SSIs. Below is an example of a SWIFT message received.
:20:DCM9907230
:23B:CRED
:32A:071015EUR35960,
:33B:EUR35960,
:50A:/429276230
ABNAGB2P
:56A:DEUTDEFF
:57A:/DE14500700100963408001
MSLNGB2X
:59:/04F511002
SOLENT CREDIT OPPORTUNITIES MAS
FUND
:71A:OUR
}}{5:{MAC:76349D31}{CHK:78117F4168F9}}
Some of the important aspects to be noted in the above SWIFT are:
Field 32A - This gives the date, currency and Amount. The date would be in the reverse order (YYMMDD). In the above example, we read the date as 15 Oct 2007.
Field 33 B - This field gives the name amount and currency again
Field 50 A - This is the account number and BIC code of the counterparty.
Field 56 A - This states the BIC code of the agent bank of the Prime Broker.
Field 57 A - This gives the IBAN / account number and the SWIFT of the Prime Broker
Field 59 - This mentions the details of the Further Credit Account - Name of the fund and the account number of the fund with the PB.
Once we see that the last 2 details are right, we forward this to the Prime Broker and query for the funds and ask them to apply it to the account of the client.
The SWIFT is a very important tool to ascertain whether the funds have reached the right place. Another important aspect is that, every payment would be assigned with a unique reference number. If we give this reference number to the Prime Broker, they should be able to track the payment.
Say we have made some payments to the counterparty and they are unable to see the receipt of the funds coming in. In this scenario, they might query us for a copy of the SWIFT. We could get it from our Prime Broker and furnish it to the counterparty.
SWIFTs - General Glossary of Terms
--A-
Account Owner An institution for which an account is serviced at another institution (account servicing institution). The account owner will often refer to the account as a nostro, or due from, account.
Account Relationship The relationship between two parties arising from the holding of at least one account between them.
Account Servicing Institution An institution that is the depository for an account for another institution (account owner). The account servicing institution will often refer to the account as a vostro, or due to, account.
Account Servicing Institutions Reference A reference assigned by the account servicing institution to identify the transaction. (This is the reference to which the account owner refers in cases of inquiry to that financial institution.)
Address A method of precisely describing a physical location. The SWIFT system permits three formats: ISO Bank Identifier Code (which includes registered SWIFT addresses); name and address; or simply place (when the institution itself is implied by other parts of the message).
Affiliate Institution For SWIFT purposes, a financial institution sharing, with one or more other financial institutions, some aspects of common ownership and control. If these financial institutions have ISO Bank Identifier Codes, they may have the same or different bank codes.
Answerback Code name of a telex subscriber, printed automatically by the telex machine at the start and finish of every message. Answerbacks are unique to the individual user and are used to identify the Receiver.
Available Balance The balance at the disposal of the account owner on the date specified. The specific formula for the calculation of the balance is dependent upon national, local, legal or bilateral agreement/conventions/requirements.
Available Funds Funds available for transfer or withdrawal in cash.
--B--
Bank For SWIFT purposes, a financial institution authorised or chartered by its national regulatory authority to be designated as a bank.
Bank Identifier Code (BIC) A universal method of identifying financial institutions in order to facilitate the automated processing of telecommunication messages in financial environments.
Bilaterally Agreed Account An account used for reimbursement under actual or implied agreement.
Branch For SWIFT purposes, a domestic or foreign location of an office of a financial institution, assigned to provide financial services on behalf of that financial institution. If this office has an ISO Bank Identifier Code, it will have the same bank code as the related financial institution. In the case of banks, representative offices are not considered branches.
By Order Of See `Ordering Institution or `Ordering Customer.
--C--
Category The classification of message types into major areas as indicated by the first digit of the message type number. The intention of the category classification is to assist with the internal routing of messages.
Common Group Category n, common to all categories. The group contains the following message types:
n90
Advice of Charges, Interest and Other Adjustments
n91
Request for Payment of Charges, Interest and Other Expenses
n92
Request for Cancellation
n93
Information Service Message
n95
Queries
n96
Answers
n98
Proprietary Message
n99
Free Format
The `n represents the category, which aids internal routing.
Correspondent Bank See `Receivers Correspondent and `Senders Correspondent.
Customer A private person or an institution, on whose behalf (ordering customer) or in whose favour (beneficiary customer), a payment is effected.
--D--
Documents Financial documents and/or commercial documents.
Due From Account See `Nostro Account.
Due To Account See `Vostro Account.
--E--
Entry Any debit or credit item posted to an account.
Entry Date Date on which entries are made in the records of an account.
Envelope The header and trailer parts of a SWIFT message.
--F--
Field A data element(s) for which the identification, description and value representation has been pre-defined. Each data element constitutes anindivisible unit. Where a field consists of more than one data element, each forms a subfield.
Fields may be:
Fixed length or variable length
Mandatory or optional
Restricted in the characters that may be used.
Financial Institution For SWIFT purposes, an organisation primarily established to offer and perform services specifically related to the provision of financial (monetary) services.
Format The rules of layout, eg, for a message type or field within a message type.
Format Checking That part of the SWIFT processing which checks that a message format conforms to the message type rules.
The checks include, among others:
presence of mandatory fields
absence of forbidden fields
field length restrictions
character restrictions
--G--
Group Message types related to one financial function. Particular groups together comprise a category. A group, within a category, is indicated by the second digit of the message type number.
--H--
Header That part of the message envelope which precedes the message text. Its prime purpose is to identify the Receiver to SWIFT and the Sender to the Receiver. Only in the header are the Sender and Receiver identified.
--I--
Intermediary Reimbursement Institution A financial institution between the senders correspondent and the receivers correspondent, through which reimbursement of a transaction will take place.
--L--
Loro Account See `Vostro Account.
--M--
Member A bank which is a paid member of SWIFT and permitted to make use of SWIFT services.
Message Type (MT) The specification of each SWIFT message by a three-digit number showing the major area (category), the function (group), and the specific details (format).
There is a set of rules for each message type.
--N--
Nostro Account A record kept by an account owner of an account serviced on its behalf by an account servicing institution. It is also known as a due from account.
--R--
Receiver The party receiving a SWIFT message as identified by its registered SWIFT address in the header of the message.
Receiving Bank See `Receiver.
Reference for the Account Owner The reference which identifies the transaction to the account owner.
Reference for the Beneficiary The reference which enables the beneficiary to identify the transaction.
Reimbursement Bank See `Receivers Correspondent and `Senders Correspondent.
--S--
Sender The party sending a SWIFT message as identified by its registered SWIFT address in the header of the message.
Sending Bank See `Sender.
Sequence A group of fields.
Sub-Account A division of an account for a financial institutions internal purposes.
Subfield A data element which constitutes the smallest indivisible unit within a field consisting of more than one data element. A group of two or more subfields constitutes a field.
Supplementary Details Information for the account owner which may be added to individual statement entries.
SWIFT Address A standard form of addressing and referring to SWIFT Members, Sub-members and Participants, using Bank Identifier Codes (BICs).
--T--
Tag A two-digit identifier of a field, sometimes followed by a letter. It marks the presence and start of the field. A letter indicates the format option chosen for the field.
Terminal Any communication equipment approved by SWIFT that is connected to a SWIFT regional processor.
Text The part of a message which is enclosed between the header and the trailer.
Trailer The part of a message envelope which follows the text. It provides the Receiver with additional information about the message. For details, see the SWIFT User Handbook, FIN Service Description.
Transaction A separate action in support of a specific business activity.
--V--
Value Date The date on which funds are at the disposal of the Receiver.
Vostro Account An account serviced by a financial institution on behalf of an account owner. It is also known as loro account, or due to account.
