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What is SWIFT
Introduction to the SWIFT system
Veena Hingarh
SWIFT as a payment system
What is SWIFT
• SWIFT is not a payment system but serves as a transport network for a large
number of major payment and securities infrastructures.
• SWIFT’s Bylaws (2012): “the object of the Company is for the collective benefit
of the Shareholders of the Company, the study, creation, utilisation and
operation of the means necessary for the telecommunication, transmission, and
routing of private, confidential and proprietary financial messages”.
• SWIFT is not a bank or a clearing and settlement institution; it does not manage
accounts on behalf of customers nor does it hold funds.
• Majority of financial institutions use SWIFT to send and receive information
about financial transactions. SWIFT does not maintain financial information on
an ongoing basis and data are only held for a limited period of time.
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a
non-state actor and one of the non-state form of regulation that had a profound
impact on how the modern world was shaped.
• SWIFT serves the financial services sector for over last four decades primarily
as a proprietary communications platform, a provider of products and services,
and a standards developer
• The system was originally designed to gradually replace the inefficient telegram
and telex messaging systems for international payments. Now SWIFT forms a
core part of the global financial services infrastructure serving more than 200
countries and territories and over 10,000 financial and non-financial customers.
SWIFT is more than a widely used provider of financial services considering the
extent to which this non-state “society” has overseen the creation of an extensive
and highly developed form of communication and regulation, and unique example
of “creeping global governance”.
SWIFT as a messaging system
SWIFT is more of a messaging system trusted for its reliability
• SWIFT is responsible for providing the network, standards, products, and
services that allow member institutions to connect and exchange financial
information.
• Financial service professionals say that the most critical part of SWIFT’s role is
achieving the secure exchange of proprietary data – in other words: reliability,
confidentiality, and integrity.
• Some practitioners recognise the SWIFT infrastructure as a key-operating
asset, others simply regard it as the necessary but fundamentally uninteresting
sector-wide “plumbing”.
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Messaging before SWIFT How is SWIFT used

Telex and telegraphic transfers preceded SWIFT but had issues with capacity, • The most widely used SWIFT messaging service is SWIFTNet FIN, which
integrity, and reliability allows the exchange of messages formatted with the traditional SWIFT MT
standards.

The Citi Chimney Sweep • SWIFTNet FIN and a range of other products and messaging services are
delivered using SWIFTNet, an IP-based messaging platform which acts as a
During the 1960s, at Citibank London, handwritten payment instructions “single window environment” for the messaging needs of SWIFT users.
were typed on a form which was then folded, put in a canister, and sent
via a vacuum tube to the authorization/confirmation section on the floor
above. After a particularly busy morning, staff in the payment section
found themselves without the confirmation necessary to complete
transactions. A staff member went to the second floor to investigate, to be
met by a bemused confirmation section who had been waiting for
payment instructions. The vacuum tube between the two floors had
become jammed and remained so until staff enlisted the services of a
chimney sweep who cleared the blockage and restored payment
processing in Europe that day.

Money Transfers – Role of Central Banks How SWIFT works

If SWIFT is privately owned, what role would central banks play?
• The payment system must be efficient and reliable in order to avoid any
operational and financial risks and ultimately ensure the exchange of funds.
• Larger the value of payments a system carries, the more significant the risks for
the overall financial stability of an economy if the payment system were to fail.
• It is imperative for payment infrastructures, especially those that deal with large
values, to settle their transactions as soon as these enter the system. These
time-sensitive, systemically important payment systems (SIPS), often referred
to as Large-Value Payment Systems (LVPS), usually incorporate real-time
gross settlement (RTGS) as part of their payment process.
• Since such risks associated with SIPS, are of great interest to central banks,
they will often be actively involved in the governance and decision-making that
control these and often central banks will own the domestic LVPSs and operate
the various payment and settlement services.
Functioning of SWIFT, the non-technical way
• SWIFT system allow consumers to send payments in various currencies, from
one bank to virtually any other bank in the world.
• Say Garrulous Grocer from India would like to make a payment of US$100,000
to their supplier, Shiny Stones in USA, they would contact their local bank
office, in India. Garrulous Grocer would instruct its bank to send a payment,
and would provide the name and account of the beneficiary (in this case, Shiny
Stones), the amount to be transferred, and the receiving bank’s SWIFT Code.
• Once bank of Garrulous Grocer receives the instruction (and confirms that it is
legitimate), the bank then debits their account of the US $100,000. It sends a
SWIFT message to bank of Shiny Stones in USA, with the instruction to credit
Shiny Stones account with US $100,000.

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How SWIFT Works
Transaction Infrastructure Services
• Authentication and identification of the agents that take part in the transaction
process by using encryption technologies
• Validation of the payment means against the system
• Verification of the ability the payer has to pay
• Authorization for the transfer of funds between the parties involved
• Processing and recording payment instructions
• The communication of the information between the financial institutions
How SWIFT Works: Y – copy message flow
• Sending bank [Bank A] addresses a payment message directly to the receiving
bank [Bank B], for instance, by an MT103 message.
• SWIFT intercepts this message, copies the entire content (or a subset) of the
message, and sends this copy to the settlement institution.
• As SWIFT receives an approval and settlement message from the settlement
institution, it forwards the original payment message to receiving institution
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How SWIFT Works – V Shaped payment
Majority of RTGS systems around the world is the V-shaped structure above.
When a payment is initiated, the sending bank transmits a message to the core
infrastructure of the settlement institution. Once the settlement process has
finished, another message is generated from the core infrastructure with a
settlement confirmation and is forwarded to the receiving bank.
Security of SWIFT payment?
Strengths and weaknesses of SWIFT
• SWIFT Payments are an easy to use, safe, secure, and quick way of making
payments and transfer international currencies. Several security checks, like
the following, are usually performed when a SWIFT payment is initiated:
- Checks to ensure fraud is not being committed by the sender (“Know Your Client”
rules), and Anti Money Laundering (AML) checks as well.
- Receiving bank also conducts similar checks, to ensure the funds are being disbursed
to the correct account.
- This can add time to the process of sending and receiving the SWIFT Payment, and
currency transfers can therefore sometime take two to three days.
• These security checks are not always a guarantee that the person or business
receiving the funds is not fraudulent, or that they will deliver the services or
goods they are obliged to deliver
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SWIFT message standards SWIFT message standards - MT

SWIFT messages consist of five blocks of the data including three headers, Types Description
message content, and a trailer. Message types are crucial to identifying content.
MT0xx System messages
• All SWIFT messages include the word "MT" (Message Type), followed by a 3
MT1xx Customer Payments and Cheques
digit number denoting the message category, group and type viz. MT103
- The first digit represents the category. A category denotes messages that relate to MT2xx Financial Institution Transfers
particular financial instruments or services such as Cash Transfer (1), Precious Metals MT3xx Treasury Markets
(6), Treasury (3), etc.
- The second digit represents a group of related parts in a transaction life cycle. For
MT4xx Collection and Cash Letters
example 0 indicates a Financial Institution Transfer. MT5xx Securities Markets
- The third digit is denotes the specific message. There are several hundred message
MT6xx Treasury Markets, Metals, and Syndication
types across the categories. For example type represented by 3 is a notification
MT7xx Documentary credit and Guarantees
• The SWIFT MT messages are categorised in to 10 categories based on the
type of functionality they support. MT8xx Travellers Cheques
MT9xx Cash Management and Customer Status

SWIFT message standards SWIFT message standards - MX

• A new message type MX is expressed in XML syntax. This is more flexible and MX Identifier Description
easier to implement than the MT messages. These message types are acmt.xxx.xxx.xx Account Management
developed in accordance with ISO 20022 standard and follows the syntax admi.xxx.xxx.xx Administration
xxxx.nnn.aaa.bb, where camt.xxx.xxx.xx Cash Management
- xxxx is an alphabetic code in four position fixed length identifying the Business
defp.xxx.xxx.xx Derivatives
Process,
pacs.xxx.xxx.xx Payments Clearing and Settlement
- nnn is an alphanumeric code in three position fixed length identifying the Message
Functionality, pain.xxx.xxx.xx Payments Initiation
- aaa is a numeric code in three position fixed length identifying a particular flavour reda.xxx.xxx.xx Reference Data
(variant) of Message Functionality, seev.xxx.xxx.xx Securities Events
- bb is a numeric code in two position fixed length identifying the version semt.xxx.xxx.xx Securities Management
sese.xxx.xxx.xx Securities Settlement
setr.xxx.xxx.xx Securities Trade
trea.xxx.xxx.xx Treasury
tsmt.xxx.xxx.xx Trade Services Management

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Understanding a SWIFT Message Understanding a SWIFT Message

Message blocks
A message consists of blocks enclosed in curly braces. 1. Basic header block containing information about message
The first colon separates the block name and content. source.
The block content can consist of sub-blocks. A typical
SWIFT. user-to-user message may consist of: • The Basic header block
{1:F01TESTBIC12XXX0360105154} contains five fixed-
1: BASIC HEADER BLOCK length fields:
2: APPLICATION HEADER BLOCK - F — Application ID
3: USER HEADER BLOCK
- 01 — Service ID
4: TEXT BLOCK
5: TRAILER BLOCK - TESTBIC12XXX — Logical terminal address of the message
source
- 0360 — Session number
- 105154 — Sequence number

Understanding a SWIFT Message Understanding a SWIFT Message

2. Application header block with
information about message
type and destination of the
message.
• This block can be either of
type Input or Output. The
instant Output block
{2:O5641057130214TESTBIC
34XXX262649382813021417
57N} contains a set of fixed-
length fields:
- O — Direction
- 564 — Message type
- 1057 — Input time
- 130214 — Input date
- TESTBIC34XXX — Logical
terminal address of the
message destination
- 2626 — Session number
- 493828 — Sequence number
- 130214 — Output date
- 1757 — Output time
- N — Priority
• An input block has a different
structure and consists of six
fixed-length fields.
3: Optional User header block contains sub-blocks with optional
processing instructions. In this example the block
{3:{103:CAD}{108:2RDRQDHM3WO}} the sub-block 103
specifies a Service identifier and 108 a Message user
reference.
4: Text block with the actual content of the message. The
format of the text block is described later.
5: User trailer block. The trailer consists of sub-blocks. In the
example {5:{CHK:C77F8E009597}} it contains a Checksum.

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Understanding SWIFT Message: The MT Message Understanding SWIFT Message: The MT Message
The content of block 4 (Text block) is often referred as MT Message. MT stands • In this example, the field :19B::NETT//USD3333, represents
for message type — a three digit number found in block 2. - an Amount (type 19) expressed as currency and amount (option B) with content
:NETT//USD3333,.
• The message type specifies the purpose and structure of the message. The
specification of MT message from the category 5xx (Securities Markets) • The 35B is an example of a multi-line field:

• The MT message consists of a sequence of fields. The fields are generally in

format :<type><option>:content<crlf>:
- the colons enclose the field tag
• The whitespace characters and line breaks are significant in the whole SWIFT
- type is a two digit number that represents the logical type (amount, rate, date,
message and cannot be used arbitrarily.
narrative etc.)
- optional option a letter that specifies the format (e.g. rate expressed as a fraction or as • There must not be any line breaks between message blocks, blank lines
a decimal number) between fields or any leading or trailing spaces in the fields (unless they are
- the structure of content depends on the type and option. The content can be a single part of the data, e.g. in Narrative fields).
or multiple lines. A field starts with a colon and ends with a line break (CRLF) followed
• In a multi-line field the colon : and a hyphen - must never be used as the first
either by semicolon (beginning of the next field) or hyphen (end of the MT message).
character of second or subsequent lines (with the exception of special field.

Understanding SWIFT Message: The MT Message Appendix: MT 1XX: Customer Payments and Cheques
SWIFT MT Description
• The MT message is logically divided into sequences — fields between
MT 101 Request for Transfer
:16R:<name> and :16S:<name>. Sequences can be repeated and nested. The MT 102 Multiple Customer Credit Transfer
MT 102+(STP) Multiple Customer Credit Transfer (STP)
order and compulsory use of fields and sequences is strictly defined for every
MT 103 Single Customer Credit Transfer
MT type by its schema. MT 103+ (REMIT) Single Customer Credit Transfer (REMIT)
MT 103+ (STP) Single Customer Credit Transfer (STP)
• Fields MT 104 Direct Debit and Request for Debit Transfer Message (STP)
MT 105 EDIFACT Envelope
- A field consists of type, option and content.
MT 106 EDIFACT Envelope
- The format of the content is determined by the type and option and is consistent MT 107 General Direct Debit Message
across all MT types. MT 110 Advice of Cheque(s)
MT 111 Request for Stop Payment of a Cheque
- The specification can be found on the ISO 15022 homepage as a component MT 112 Status of a Request for Stop Payment of a Cheque
sequence and a list of subfields. For Rate 92F the specification is MT 121 Multiple Interbank Funds Transfer (EDIFACT FINPAY Message)
• :4!c//3!a15d (Qualifier)(Currency Code)(Amount). MT 190 Advice of Charges, Interest and Other Adjustments
MT 191 Request for Payment of Charges, Interest and Other Expenses
- The first part specifies the format — colon, exactly four characters followed by two MT 192 Request for Cancellation
slashes, exactly three characters and up to 15 digits (including a decimal comma). MT 195 Queries
MT 196 Answers
- In parentheses are names of the subfields — the part before the slashes is Qualifier, MT 198 Proprietary Message
the three letters are Currency code and the number is the Amount. MT 199 Free Format Message

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Appendix: MT 2XX: Financial Institution Transfers Appendix: MT 3XX: Treasury, Forex, MM, Derivative
SWIFT MT Description
SWIFT MT Description MT 300 Foreign Exchange Confirmation
MT 200 Financial Institution Transfer for its Own Account MT 303 Forex/Currency Option Allocation Instruction
MT 304 Advice/Instruction of a Third Party Deal
MT 201 Multiple Financial Institution Transfer for its Own Account MT 305 Foreign Currency Option Confirmation
MT 202 General Financial Institution Transfer MT 306 Foreign Currency Option Confirmation
MT 307 Advice/Instruction of a Third Party FX Deal
MT 203 Multiple General Financial Institution Transfer MT 308 Instruction for Gross/Net Settlement of Third Party FX Deals
MT 204 Financial Markets Direct Debit Message MT 320 Fixed Loan/Deposit Confirmation
MT 321 Instruction to Settle a Third Party Loan/Deposit
MT 205 Financial Institution Transfer Execution MT 330 Call/Notice Loan/Deposit Confirmation
MT 206 Cheque Truncation Message MT 340 Forward Rate Agreement Confirmation
MT 341 Forward Rate Agreement Settlement Confirmation
MT 207 Request for Financial Institution Transfer MT 350 Advice of Loan/Deposit Interest Payment
MT 210 Notice to Receive MT 360 Single Currency Interest Rate Derivative Confirmation
MT 361 Cross Currency Interest Rate Swap Confirmation
MT 256 Advice of Non-Payment of Cheques MT 362 Interest Rate Reset/Advice of Payment
MT 290 Advice of Charges, Interest and Other Adjustments MT 364 Single Currency Interest Rate Derivative Termination/Recouponing Confirmation
MT 365 Single Currency Interest Rate Swap Termination/Recouponing Confirmation
MT 291 Request for Payment of Charges, Interest and Other Expenses MT 380 Foreign Exchange Order
MT 292 Request for Cancellation MT 381 Foreign Exchange Order Confirmation
MT 390 Advice of Charges, Interest and Other Adjustments
MT 295 Queries
MT 391 Request for Payment of Charges, Interest and Other Expenses
MT 296 Answers MT 392 Request for Cancellation
MT 395 Queries
MT 298 Proprietary Message
MT 396 Answers
MT 299 Free Format Message MT 398 Proprietary Message
MT 399 Free Format Message

Appendix: MT 4XX: Collections and Cash Letters Appendix: MT 5XX:Securities Market

SWIFT MT Description
SWIFT MT Description MT 500 Instruction to Register
MT 400 Advice of Payment MT 501 Confirmation of Registration or Modification
MT 502 Order to Buy or Sell
MT 405 Clean Collection
MT 502 (FUNDS) Order to Buy or Sell (FUNDS)
MT 410 Acknowledgment MT 503 Collateral Claim
MT 412 Advice of Acceptance MT 504 Collateral Proposal
MT 416 Advice of Non-Payment/Non-Acceptance MT 505 Collateral Substitution
MT 506 Collateral and Exposure Statement
MT 420 Tracer
MT 507 Collateral Status and Processing Advice
MT 422 Advice of Fate and Request for Instructions
MT 508 Intra-Position Advice
MT 430 Amendment of Instructions MT 509 Trade Status Message
MT 450 Cash Letter Credit Advice MT 509 (FUNDS) Trade Status Message (FUNDS)
MT 455 Cash Letter Credit Adjustment Advice MT 510 Registration Status and Processing Advice
MT 513 Client Advice of Execution
MT 456 Advice of Dishonor
MT 514 Trade Allocation Instruction
MT 490 Advice of Charges, Interest and Other Adjustments MT 515 Client Confirmation of Purchase or Sale
MT 491 Request for Payment of Charges, Interest and Other Expenses MT 515 (FUNDS) Client Confirmation of Purchase or Sale (FUNDS)
MT 492 Request for Cancellation MT 516 Securities Loan Confirmation
MT 517 Trade Confirmation Affirmation
MT 495 Queries
MT 518 Market-Side Securities Trade Confirmation
MT 496 Answers
MT 519 Modification of Client Details
MT 498 Proprietary Message MT 524 Intra-Position Instruction
MT 499 Free Format Message MT 526 General Securities Lending/Borrowing Message
MT 527 Triparty Collateral Instruction
MT 528 ETC Client-Side Settlement Instruction
MT 529 ETC Market-Side Settlement Instruction

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Appendix: MT 5XX:Securities Market (Cont’d) Appendix: MT 5XX:Securities Market (Cont’d)

SWIFT MT Description
MT 564 Corporate Action Notification
SWIFT MT Description
MT 565 Corporate Action Instruction
MT 530 Transaction Processing Command MT 566 Corporate Action Confirmation
MT 535 Statement of Holdings MT 567 Corporate Action Status and Processing Advice
MT 535 (FUNDS) Statement of Holdings (FUNDS) MT 568 Corporate Action Narrative
MT 569 Triparty Collateral and Exposure Statement
MT 536 Statement of Transactions
MT 574 (IRSLST) IRS 1441 NRA (Beneficial Owners’ List)
MT 537 Statement of Pending Transactions MT 574 (W8BENO) IRS 1441 NRA (Beneficial Owner Withholding Statement)
MT 538 Statement of Intra-Position Advice MT 575 Report of Combined Activity
MT 540 Receive Free MT 576 Statement of Open Orders
MT 577 Statement of Numbers
MT 541 Receive Against Payment
MT 578 Statement of Allegement
MT 542 Deliver Free MT 579 Certificate Numbers
MT 543 Deliver Against Payment MT 581 Collateral Adjustment Message
MT 544 Receive Free Confirmation MT 582 Reimbursement Claim or Advice
MT 584 Statement of ETC Pending Trades
MT 545 Receive Against Payment Confirmation
MT 586 Statement of Settlement Allegements
MT 546 Deliver Free Confirmation MT 587 Depositary Receipt Instruction
MT 547 Deliver Against Payment Confirmation MT 588 Depositary Receipt Confirmation
MT 548 Settlement Status and Processing Advice MT 589 Depositary Receipt Status and Processing Advice
MT 590 Advice of Charges, Interest and Other Adjustments
MT 549 Request for Statement/Status Advice
MT 591 Request for Payment of Charges, Interest and Other Expenses
MT 558 Triparty Collateral Status and Processing Advice MT 592 Request for Cancellation
MT 559 Paying Agent’s Claim MT 595 Queries
MT 596 Answers
MT 598 Proprietary Message
MT 599 Free Format Message

Appendix: MT 6XX: Treasury Market, Precious Metal Appendix: MT 7XX: Treasury Market, Syndication

SWIFT MT Description SWIFT MT Description

MT 600 Precious Metal Trade Confirmation MT 700 Issue of a Documentary Credit
MT 601 Precious Metal Option Confirmation MT 701 Issue of a Documentary Credit
MT 604 Precious Metal Transfer/Delivery Order
MT 705 Pre-Advice of a Documentary Credit
MT 605 Precious Metal Notice to Receive
MT 606 Precious Metal Debit Advice MT 707 Amendment to a Documentary Credit
MT 607 Precious Metal Credit Advice MT 710 Advice of a Third Bank’s Documentary Credit
MT 608 Statement of a Metal Account
MT 711 Advice of a Third Bank’s Documentary Credit
MT 609 Statement of Metal Contracts
MT 620 Metal Fixed Loan/Deposit Confirmation MT 720 Transfer of a Documentary Credit
MT 643 Notice of Drawdown/Renewal MT 721 Transfer of a Documentary Credit
MT 644 Advice of Rate and Amount Fixing MT 730 Acknowledgment
MT 645 Notice of Fee Due
MT 732 Advice of Discharge
MT 646 Payment of Principal and/or Interest
MT 649 General Syndicated Facility Message MT 734 Advice of Refusal
MT 690 Advice of Charges, Interest and Other Adjustments MT 740 Authorization to Reimburse
MT 691 Request for Payment of Charges, Interest and Other Expenses MT 742 Reimbursement Claim
MT 692 Request for Cancellation
MT 747 Amendment to an Authorization to Reimburse
MT 695 Queries
MT 696 Answers
MT 698 Proprietary Message
MT 699 Free Format Message

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Appendix: MT 7XX: Treasury Market, Syndication Appendix: MT 8XX: Travellers Cheques

SWIFT MT Description
SWIFT MT Description MT 800 T/C Sales and Settlement Advice [Single]
MT 750 Advice of Discrepancy MT 801 T/C Multiple Sales Advice
MT 752 Authorization to Pay, Accept or Negotiate MT 802 T/C Settlement Advice
MT 754 Advice of Payment/Acceptance/Negotiation MT 810 T/C Refund Request
MT 756 Advice of Reimbursement or Payment MT 812 T/C Refund Authorization
MT 760 Guarantee MT 813 T/C Refund Confirmation
MT 767 Guarantee Amendment MT 820 Request for T/C Stock
MT 768 Acknowledgment of a Guarantee Message MT 821 T/C Inventory Addition
MT 769 Advice of Reduction or Release MT 822 Trust Receipt Acknowledgment
MT 790 Advice of Charges, Interest and Other Adjustments MT 823 T/C Inventory Transfer
MT 791 Request for Payment of Charges, Interest and Other Expenses MT 824 T/C Inventory Destruction/Cancellation Notice
MT 792 Request for Cancellation MT 890 Advice of Charges, Interest and Other Adjustments
MT 795 Queries MT 891 Request for Payment of Charges, Interest and Other Expenses
MT 796 Answers MT 892 Request for Cancellation
MT 798 Proprietary Message MT 895 Queries
MT 799 Free Format Message MT 896 Answers
MT 898 Proprietary Message
MT 899 Free Format Message

Appendix: MT 9XX: Cash Management & Customer Status

SWIFT MT Description
MT 900 Confirmation of Debit
MT 910 Confirmation of Credit
MT 920 Request Message
MT 935 Rate Change Advice
MT 940 Customer Statement Message
MT 941 Balance Report
MT 942 Interim Transaction Report
MT 950 Statement Message
MT 970 Netting Statement
MT 971 Netting Balance Report
MT 972 Netting Interim Statement
MT 973 Netting Request Message
MT 985 Status Inquiry
MT 986 Status Report
MT 990 Advice of Charges, Interest and Other Adjustments
MT 991 Request for Payment of Charges, Interest and Other Expenses
MT 992 Request for Cancellation
MT 995 Queries
MT 996 Answers
MT 998 Proprietary Message
MT 999 Free Format Message