MT 760 Decoded
MT 760 belongs to a category of SWIFT Message types for guaranteeing letters of credit. SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. Essentially, it is used to securely transfer information and instructions through a system of codes.
What is a SWIFT Code?
It works because SWIFT allocates each organization a specific code that is called the Bank Identifier Code (BIC)/ SWIFT Code.
Who Needs SWIFT?
Originally, the founders of SWIFT aimed the network at Treasury communications, however, its popularity grew and with this growth, came SWIFT’s customer base. The message’s format allowed for great expansion and allowed SWIFT to now provide to:
- Asset Management Companies
- Brokerages/ Trading companies
- Normal Businesses
- Treasury market
Example of the format of an MT 760
Figure 1: An example of a MT760 (Source: SWIFT)
An example of an MT 760 message could include the following:
- A narrative statement explaining the context (e.g. XX company has signed a contract with YY company to provide equipment.
- Narrative would state all of the details of the transaction (as per the formats above).
- The SWIFT message would include the Sender, Message Type (760), Receiver and Sequence number, before providing information required.
What happened before Swift?
Before SWIFT was used to guarantee Letters of Credit and send information, a system called Telex was used. This was unfortunately hindered by low speeds, multiple security concerns and also no coding system – Transactions had to be described by the senders which were then interpreted by the receiver.
Why is MT 760 used in trade?
MT 760 can be used either by the party issuing a beneficiary on a guarantee or LOC, or by the party issuing a counter-undertaking to the beneficiary.
MT 760 is another type of SWIFT message sent from an issuing bank to an advising bank, with details of the SBLC or bank guarantee. Generally, the MT 799 is subject to the rules of the following:
- URDG (Uniform Rules for Demand Guarantees)
- ICC UCP 600 (International Chamber of Commerce Uniform Customs and Practice for Documentary Credit)
- ISP (International Standby Practices)
What are the rules of the MT 760?
Often MT 760s reach their maximum size limit, so one or more can be used to extend the size. Additional MT 760s require MT 761s, and up to eight can be sent on top of the original MT 760 to provide the relevant information on the SBLC or Guarantee.
It’s important to ensure that duplicate content is not added to supplementary MT 761s (e.g. the Undertaking Amount), and that the information does not conflict with the MT 760.
Sequence C (Optional Information) can only be used when Sequence B is for a counter-undertaking for a Guarantee or Letter of Credit.
MT 760 Criteria
Unlike the MT 799, the 760 requires much more information regarding the transaction. Information such as:
- Parties involved (Issuer, Beneficiary, Applicant, Obligor, Advising Bank)
- Transaction Details
- Transport details; goods presentation
- Dates and timings
Potential Issues/ Advancements for SWIFT
In late 2017, SWIFT worked on a proof-of-concept with six major banks which was aiming to discover whether Blockchain technology can help them reconcile their NOSTRO accounts in real time.
A NOSTRO account is a bank account that a UK Bank has with a foreign Bank, and it usually is in the currency of that country. The way in which Blockchain constantly updates the logbook owned by every member of the chain provides transparency which SWIFT may look to utilize to increase efficiency in the messaging process.
This is an issue SWIFT has. As many of their clients have astronomical transaction volumes, they are difficult to keep up with. Although their capability is far better than Telex, the need for automation in the creation and processing of messages is no secret.
Other Messaging Types and More Info
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