Swift Messages in Letters of Credit
What does SWIFT mean in trade finance?
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 provide a secure communications platform by which financial institutions can communicate each other reliably and fastly and secondly SWIFT establishes standard message formats which can be used on secure SWIFT platforms. Today banks use SWIFT platform to communicate each other when sending a wire transfer, issuing a letter of credit, advising a discrepancy message etc. Each of these message formats have a different code, which is called swift message types. For example a bank must use MT700 Issue of a Documentary Credit when issuing a letter of credit and MT 734 advice of a refusal when giving its refusal message. (MT means Message Type)
On below table you can find main swift message types used in letters of credit transactions.
Message Type | Explanation |
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 730 | Acknowledgement |
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 |