In this article, we continued our analysis of the SCT interbank messages. The previous article was about the pacs.008 and pacs.002 messages. The pacs.008 is used to transfer funds from Originator Bank to Beneficiary Bank. The pacs.002 is initiated to reject credit transfers that a CSM or Bank cannot process. As said in the previous article, one message (pacs.008) is used to move the money, but many messages are needed to handle the exceptions. Therefore the pacs.004, camt.056 and camt.029 are all exception handling messages. Let’s consider them now.
Pacs.004.001.02 (Return SCT)
The Payment Return message is used to undo a payment previously settled. When a bank receives a pacs.008, it should process it and books the money to the beneficiary account. But what if the beneficiary closed his account two days ago? What if the account does not exist at all in the Bank? In those cases, the bank will not be able to credit the account. According to the SEPA rules, the beneficiary bank must return the money to the originator Bank. Besides the reasons mentioned above, there are numerous reasons why a bank might have to return the money. In any case, it will use the pacs.004 message to do that. The return has its own settlement date, the date at which the money will be paid back to the originator bank. The reason for returning the funds is indicated by a code in the return message.
A bank can only return the money that it has previously received. So the payment return message is initiated and sent after settlement. The SEPA rules oblige the Beneficiary Bank to send the Return message to the Originator Bank at the latest three Banking Business Days after Settlement Date. The underlying principle is that money should be return as soon as possible to the originator.
Camt.056.001.01 (Recall SCT)
The Debtor Bank makes use of the recall message to submit cancellation requests to the Beneficiary bank. But why would a Debtor bank want to cancel a previously sent credit transfer (pacs.008)? Several reasons exist. The credit transfer can be sent two times because of a human error for instance. Or a technical error may cause the sending of erroneous pacs.008 messages. In both cases, the debtor will try to get his money back by sending a cancellation request. Please notice that a cancellation request message does not move money. It is not a booking message and therefore there is no settlement date in the camt.056 message.
According to the SEPA rules, the originator bank can send the cancellation request up to 10 days after the settlement of the credit transfer message. After reception of the request, the beneficiary bank has two choices: to accept or to refuse.
Remark: In the 2017 SCT Rulebook, the Request for Recall by the Originator was introduced and will enter into force as of 18 November 2018. It allows the debtor under certain conditions to claim the funds reimbursement of a settled credit transfer up to 13 months after settlement.
Pacs.004.001.02 (Positive Response to Recall)
The positive response to a recall is sent by the beneficiary Bank, when it responds favorably to the request of the originator bank to cancel the original payment. The name of this message is familiar to us. We saw before that the Payment Return message, which is used by the beneficiary bank to return funds when they cannot be credited to the beneficiary account, is also a pacs.004. The positive response to a cancellation request is a payment return. But in this case the return is not made because the money cannot be credited. The funds are returned because the originator bank has requested to have them back. The beneficiary account has been credited and it has to be debited in order to give the funds back. In most countries, the law obliges beneficiary banks to explicitly get the consent of their clients before returning the funds. The bank must get the customer approval before returning the funds and that may take few days.
The positive response message is a return message with the particular reason code FOCR (Following Cancellation Request). A reason code indicates why the beneficiary bank returns the funds. For a positive response to a cancellation request, the only reason code allowed is FOCR. If there is another reason code in the pacs.004, it is considered a normal return, not a positive response to a cancellation request.
According to the SEPA rulebook, the beneficiary bank can send the positive response to a cancellation request up to 10 business days after the reception of the cancellation request message.
Camt.029.001.03 (Negative Response to Recall / Resolution of Investigation)
The negative response to a recall is sent by the beneficiary Bank, when it responds unfavorably to the demand of the originator bank to cancel the original payment. The negative response, also called resolution of investigation, informs the debtor bank that his request has been rejected and therefore it will not get the money back.
The camt.029 is not a booking message. It means that there is no movement of funds associated with it. It just gives the information that the beneficiary bank or the beneficiary refuses to give the money back.
According to the SEPA Business rules, the beneficiary bank can send the negative response to a cancellation request up to 10 business days after the reception of the cancellation request message.
For your information, I have published an ebook about SEPA Credit Transfer where one full chapter is dedicated to SEPA Credit Transfer messages. It is available in the sample that you can download here. If after reading it you are interested in the rest of the book, you can purchase the full version. Here is the link to download the sample of the SEPA Credit Transfer eBook.