Society for Worldwide Inter-bank Financial Telecommunication

 

 

SWIFT (”Society for Worldwide Inter-bank Financial Telecommunication”) provide mechanisms for electronic inter-bank messaging and funds transfer. SWIFT messages can be and are used legitimately to conduct business between transactional partners, we have seen references to the SWIFT system in transactions which we would consider to be dubious.

The SWIFT system was established in the early 1970’s by a group of European banks who until that time had been conducting business together via telex and courier. SWIFT is a much more comprehensive messaging system than FEDWIRE, and provides for a number of different message types and purposes. Each type of SWIFT message is pre-defined and follows a specified format. All SWIFT messages must adhere to these established forms or they will be rejected by the receiving bank.

We have encountered a number of “offers” for various products and goods in which the purported seller requires the buyer to initiate a SWIFT message type MT103, supposedly to “prove funds” prior to inspection of the offered commodity. A SWIFT MT103 is a “Customer Payment” message, and relates to the transfer of funds in payment for goods received. In short, an MT103 is a funds transfer message. We would never agree to transmit an MT103 to any party who is unknown to us, or for the payment of any goods or products that we have not inspected and agreed to purchase. For all practical purposes, the transmission of a SWIFT MT103 is equivalent to wiring funds from one account to another.

We also occasionally encounter “offers” that require the “blocking” of funds through the transmission of a SWIFT message type MT760. Used as a form of documentary credit by legitimate trading parties, an MT760 is essentially a guarantee that funds will be available when they are called upon. For this reason, issuing an MT760 can be a dangerous proposition unless you have a complete understanding of all aspects of a contemplated transaction and the identity of your trading partners. We have heard stories of more than one investor who has had an MT760 issued in favor of a “trader” who then drew a credit line against the guarantee. The “trader” disappeared with the proceeds of the credit line, leaving the “investor” responsible for repayment. The lending bank called upon the “blocked funds” to repay the credit line and the investor lost his money. Be extremely careful should a potential trading partner request that you “block funds” via an MT760.

A potential trading partner will often ask us to have our bank issue a SWIFT message type MT799 as evidence of the financial capability to engage in a particular transaction. An MT799 message is essentially a “free format” text message sent between banks and is treated much like a secure form of email. Be wary, however, of agreeing to transmit any language in an MT799 that relates to “guaranteeing” a payment or the “blocking” of funds. That is not the purpose of this type of message.

 

About DFS Worldwide, LLC.
DFS WORLDWIDE LLC., can arrange money for when your business needs it the most. We Specialize in helping businesses with their cash flow, by providing solutions for the ever present need for money. We do this in several ways including factoring, purchase order funding, equipment leasing, asset based lending and many other funding alternatives. We value professionalism; being fair; recognizing that what’s best for the customer is what’s best for us; we don’t compromise our principles to do a deal. We take pride in our work and our relationships.

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