After the introduction and analysis of SWIFT cover and serial payments, we are now looking at one concrete example of SWIFT MT103 announcement and MT202 cover payment. In the first article of this series, we performed a detailed analysis of a MT103 announcement sent by the debtor bank to the creditor bank. In the second article, we studied the SWIFT MT202 COV sent by BNP Paribas to its correspondent. Now we want to know what after the first SWIFT MT 202 COV is received. How is it forwarded to the next party in the chain? and what is the content of that message? This article will respond to these questions.
It is worth looking at the picture depicting the messages and the different parties again. It is the same as the one we saw in the previous article but with light differences.
It is important to note that we are now looking at the second SWIFT MT202 COV payment sent by Wells Fargo, correspondent of BNP Paribas (BNPP). Wells Fargo sends it to Bank of New York which holds the account of the beneficiary institution in USD. The sender’s correspondent in MT103A is the sender. And the receiver’s correspondent in MT103A that was the account with institution in the first SWIFT MT202 COV now becomes the receiver.
A brief reminder of the context: A company in France, customer of BNPP in Paris, wants to send payment in USD to another company in Spain, customer of Banco Santander in Madrid. Since BNP Paribas and Santander are not located in the USD currency zones, the funds transfer happens through their correspondent accounts opened with Banks in the USA. In this example, we assume that the correspondent of BNPP is Wells Fargo and the correspondent of Santander is Bank of New York Mellon. BNPP sent a combination of SWIFT MT103 Announcement and MT202 Cover payment messages for the transfer. And BNPP’s correspondent is now forwarding the transfer to Santander’s correspondent.
The table below contains the fields that are transported in the second SWIFT MT202 COV payment message. An additional column (comments) provides further explanation, so that it is easy to understand each field and what it is used for.
Read this page on the SWIFT formatting rules and Character sets of MT Messages to get additional information and understand what 16x, 4!c and the format of the field options mean.
The third message in our study that is analyzed in detail below is the second SWIFT MT202 COV.
Narratives and notes on this SWIFT MT202 COV message
This SWIFT MT202 cover payment is pretty simple but a careful analysis revealed few interesting things. The following narratives and notes allow to get a deeper understanding of the message content.
Narrative and note 1 (Main purpose of this SWIFT MT202 COV)
The Sender (PNBPUS3N) is instructing the receiver (IRVTUS3N) to debit sender’s account and credit the account of BSCHESMM, the beneficiary institution. As indicated on the picture, this transaction can happen through a local clearing system that interconnects the banks in a country or region. In that case, funds are transferred between banks through the clearing systems like domestic payments. All the information is forwarded to the next party. It is just in a different format.
Narrative and note 2 (Meaning of COV in the MT202 cover payment)
The Block 3 of the message carries a Validation flag (Tag119) to indicate it is a cover payment. That means this MT202 is related to an underlying Customer Credit transfer message. In case there is no underlying customer payment, Banks should use the normal MT202.
MT202 COV has 2 sequences in the message format: Sequence A which contains the MT202 COV payment transmission details and Sequence B which contains the MT103 message details. The sequence B (Underlying Customer Credit Transfer Details) in the MT202 COV must contain at least Ordering Customer and Beneficiary Customer information and must match exactly the ones provided in the MT103 Announcement.
Narrative and note 3 (Unique End-to-end Transaction Reference in this SWIFT MT202 COV)
The MT202 Cov contains exactly the same unique End-to-end Transaction Reference as the MT103 Announcement and the first SWIFT MT202 COV. This shows that even if three payment messages (An announcement and two covers) have been exchanged, it is the same transaction.
Narrative and note 4 (Fields in this SWIFT MT202 COV)
- Sender of 2nd MT202 COV = Sender’s correspondent 53A of MT103 = PNBPUS3N. It holds the USD account of BNPAFRPP.
- Receiver of 2nd MT202 COV = Field 54A (Receiver’s correspondent) of MT103 Announcement = IRVTUS3N.
- Transaction reference (:20:202PNBPREF2679) specific to this SWIFT MT 202 COV is generated by the Sender PNBPUS3N.
- Related reference in MT202 Cov (:21:103REF405775) = Sender’s reference in the MT 103 (:20:103REF405775). It is the same related reference that was provided in the first MT202 COV. It can be used to reconcile the cover with the announcement.
- Field 52A (Ordering institution) is provided by PNBPUS3N to inform IRVTUS3N that the initial instruction was given by BNPAFRPP. Without it, the receiver would wrongly assume that PNBPUS3N is the ordering institution.
- Field 57A (Account with Institution) is not present in this SWIFT MT202 COV – That indicates that receiver Bank of New York is the account holder of the beneficiary institution Banco Santander (BSCHESMM).
- Field 58A (Beneficiary Institution) = BSCHESMM remains the same as in the first MT 202 cover. The funds have the same destination.
Now we are done with the analysis of announcement and cover payments. But other questions still remain: what are the MT910 and MT950 that we see between Receiver and Beneficiary institution? What are these messages used for and what do they contain? These questions will be answered in next articles.