SWIFT is the short form of “Society for Worldwide Interbank Financial Telecommunication”.
Swift defines its role in international financial transactions on its website as follows.
“Our role is two-fold. We provide the proprietary communications platform, products and services that allow our customers to connect and exchange financial information securely and reliably. We also act as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest.”
In simple terms swift has two main roles in international financial transactions,
- firstly, SWIFT provides a secure, fast, and reliable communication platform with which financial institutions can communicate with each other.
- secondly, SWIFT establishes standard message formats which can be used in its platform.
Today banks use SWIFT platform to communicate with each other, for example when sending a wire transfer, issuing a letter of credit, advising a discrepancy message etc.
Specifically, swift message types related to the letters of credit and bank guarantees are classified under Category 7 as shown below.
Category 7-Documentary Credits and Guarantees
Part 1-Documentary Credits
MT 700-Issue of a Documentary Credit
MT 701-Issue of a Documentary Credit
MT 705-Pre-Advice of a Documentary Credit
MT 707-Amendment to a Documentary Credit
MT 710-Advice of a Third Banks Documentary Credit
MT 711-Advice of a Third Banks Documentary Credit
MT 720-Transfer of a Documentary Credit
MT 721-Transfer of a Documentary Credit
MT 732-Advice of Discharge
MT 734-Advice of a Refusal
MT 740-Authorization to Reimburse
MT 742-Reimbursement Claim
MT 747-Amendment to an Authorisation to Reimburse
MT 750-Advice of Discrepancy
MT 752-Authorisation to Pay, Accept or Negotiate
MT 754-Advice of Payment/Acceptance/Negotiation
MT 756-Advice of Reimbursement or Payment
Part 3-Common Group
790 Advice of Charges,
791 Request for Payment of Charges, Interest and Other Expenses
792 Request for Cancellation
798 Proprietary Message
799 Free Format Message
- MT700 Issue of a Documentary Credit message type should be used when issuing a letter of credit
- MT 734 Advice of a Refusal message type should be used when sending a refusal message.
PS: MT means Message Type.