Post by niseag on Feb 4, 2010 0:14:20 GMT 4
"Field 23 - Instruction Code" in a SWIFT MT 103 is the part of the wire where the remitting bank at the request of the remitter instructs the beneficiary's bank how to effect the payment, such as "Credit Account under Advice", "Telephone beneficiary on receipt", "Pay against passport" and such like. It has no legal binding character if there is no Master Agreement between the involved banks. Such Master Agreement is generally in place when Money Center Banks are involved which have Nostro Account Relations. In such case the field 23 can be used to make reference to an agreed scenario and such advise would for example read: "credit account under advice following Art........ of the Agreement on Settlement of Funds, following reference ......" Such would only be legally binding however if the receiving bank does confirm her agreement to such reference in order to hold them to it.
MT103 is a straight-through processing mechanism requiring very little manual intervention, you cannot send an MT103 with a condition that the beneficiary's bank must receive, say certain documents, from the beneficiary before crediting his account. You can reference such pre-agreed condition but that binding condition is outside the SWIFT arrangement, which makes the SWIFT itself an "unclean" instrument Banks like to avoid because of legal difficulties. Usually such a request will be rejected by the remitting bank, and if sent in Field 23 will be rejected and ignored by the beneficiary's bank who will credit the beneficiary's account anyway, since they have not reconfirmed their agreement to act as an escrow agent (which would be an extra fee). Remember field 23 is not big, it usually only accomodates coded entries which in itself refer to the SWIFT Master Agreement and do not include conditions.
Transactions that involve the exchange of money for documents are documentary collections (D/A, D/P etc.) and are processed differently.
In some countries banking includes financial escrow, but it requires a different set up and handling than a SWIFT MT103
MT103 is a straight-through processing mechanism requiring very little manual intervention, you cannot send an MT103 with a condition that the beneficiary's bank must receive, say certain documents, from the beneficiary before crediting his account. You can reference such pre-agreed condition but that binding condition is outside the SWIFT arrangement, which makes the SWIFT itself an "unclean" instrument Banks like to avoid because of legal difficulties. Usually such a request will be rejected by the remitting bank, and if sent in Field 23 will be rejected and ignored by the beneficiary's bank who will credit the beneficiary's account anyway, since they have not reconfirmed their agreement to act as an escrow agent (which would be an extra fee). Remember field 23 is not big, it usually only accomodates coded entries which in itself refer to the SWIFT Master Agreement and do not include conditions.
Transactions that involve the exchange of money for documents are documentary collections (D/A, D/P etc.) and are processed differently.
In some countries banking includes financial escrow, but it requires a different set up and handling than a SWIFT MT103
