03 Oct DIFFERENCES BETWEEN SWIFT MT799 AND SWIFT MT799 vs MT760
THE DIFFERENCES BETWEEN THE SWIFT MESSAGING TYPES: SWIFT MT799 AND SWIFT MT799 vs MT760
MT799 is a digital message that is sent between banks; with the aim of showing funds or proof of deposits. It is important to note that it is not used as a method of transferring funds or an undertaking to do the same.
MT760 is a message used for issuing or requesting a Letter of Credit or Documentary Credit. Both SWIFT MT799 and SWIFT MT760 are a type of inter-bank message that are used on the SWIFT system so that financial institutions can correspond.
Both are interbank message types that are used on the SWIFT system to enhance financial institutions’ communication.
So these two global swift systems are used by more than eleven thousand financial institutions around the world in sending and receiving various financial statements and letters. The most prominent letter used in this system is the MT760 swift and the MT799 Swift. These two letters have a number of differences and similarities. The main similarity between the two types of swift messages is in how they are sent. Both letters are sent from one bank to another without necessarily consulting the client.
Another similarity is that both letters are sent during a significantly large transaction between two individuals. In spite of these similarities, the two swift messages have numerous differences that individuals should be aware of.
The main difference between the MT760 swift message and the MT799 swift message is in when they are sent. The MT799 is sent before the MT760 and is a prelude to the sending of the MT760. Hence, the role of the MT799 is merely to notify and nothing else. This document is sent days or weeks before the sending of the MT760. It is important to note that the MT799 has no impact on the financial situation of an individual. This is another big difference that exists between the two documents.
The MT760 swift message will impact the financial condition of a client since it a verification of freezing of funds by one bank. The MT799 Swift message will have no impact on the financial situation of an individual since it is sent before the funds are frozen. This is another difference between the two documents. Another difference between the two documents is that the MT760 swift is sent after the sending bank has set aside the required amount of money. The MT799 is sent before the sending bank freezes the required amount of money in the purchasing individual’s bank account.This is a Swift class 7: Bank Guarantee and Letter of Credit procedure, Procedure 60: Blocked Funds. the course of action when your bank issues MT-760: When an MT-760 is issued, the issuing bank puts a hold on the client’s funds, blocking the client from using them.
So what is the difference between SWIFT MT 799 and SWIFT MT 760?
Banks, practitioners, and businesses often confuse the term SWIFT MT 760 and the SWIFT MT 799.
MT760 and MT799 are often mentioned when working with Bank Guarantees or types of Documentary Credits.
The SWIFT MT 799 is the message format used for correspondence sent in relation to Bank Guarantees.
The SWIFT MT 799 acts as a straightforward confirmation, which sets out that funds are present to cover a specific transaction.
The reasoning behind the format and method of the proof of funds is so that it conforms to the message type used in the SWIFT Category 7 “Treasury Markets & Syndication”.
It is perceived as a verification tool and acts only as a bank-to-bank SWIFT electronic verification.
Key differences (summary)
| SWIFT MT 799 | SWIFT MT 760 |
|---|---|
| Pre-advice communications between banks | The message used to block funds |
| Confirmation message (2-way response) | Collateralises assets via a SWIFT guarantee |
| Often construed as proof of funds | Potential for a 1-2% fee for blocking |
| Unauthenticated message | Often seen as a bank guarantee or equivalent |
How does SWIFT messaging work?
SWIFT is a communication service that acts as a messenger between banks and other financial institutions.
The service uses consistently formatted codes to identify its more than 11,000 member institutions, making it easy for members to transmit information to other member institutions.
For example, imagine a scenario where a Canadian company with an account at a TD Bank branch in Ottawa needs to pay an invoice to a German supplier with an account at a Deutsche Bank branch in Berlin.
In order to make this payment, the Canadian company only needs to provide TD Bank with the SWIFT code for the supplier’s bank in Berlin and the supplier’s account number with that bank.
Now, as long as TD Bank and Deustchebank have a commercial relationship, this payment can easily be made from one institution to the other.
This is just one example of the more than 220 message types that are grouped into nine different categories.
SWIFT free format messages
These types of messages are sometimes referred to as “free format messages”.
One of the main differences between the types of messages is the exchange of a BKE authenticator used in a MT 799; so a test key is coded into the messages sent and received.
MT 799 is very similar, but there is no test code and so the message is unauthenticated and has less value unless the message is confirmed.
Sometimes the chosen form of communication is the SWIFT MT 760 message when the SWIFT MT 799 could be a satisfactory bank confirmation.
It is important to note that this message type will be sent prior to the signing of agreements and issuance of instruments.
However, it is also important to note that for a SWIFT MT 799 to be sent, many financial institutions will have a minimum size of account or transaction required.
The process of a MT 799 is that it is usually received by the funder of the seller; then that recipient institution will normally send a proof of product to the buyer’s financial institution.
The trade will then progress.
Payment is then usually made through a wire payment (MT 103) or documentary letter of credit.
LETTERS OF CREDIT (LC)
A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make a payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.
So in essence, a Letter of credit, also known as Documentary Letter Of Credit, is the bank’s obligation to pay the seller of goods or services a certain amount of money in the timely submission of documents confirming shipment of goods or performance of contractual services.
Documentary letter of credit is one of the most important means of financing in international trade, as the letter of credit is a tool that removes most of the risks as from the buyer (importer) and from the seller (exporter).
SWIFT MT799 and swift MT760
BANK GUARANTEE (BG)
A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss. Note that a bank guarantee is not the same as a letter of credit. How it works/Example: Let’s assume Company XYZ is a small, relatively unknown restaurant company that would like to purchase €3 million of kitchen equipment. The equipment vendor may require Company XYZ to provide a bank guarantee in order to feel more confident that it will receive payment for the equipment it ships to Company XYZ. To obtain this bank guarantee, Company XYZ requests one from its preferred lender (usually the bank with which it keeps its cash accounts). The lender provides the guarantee in writing, which is then passed on to Company XYZ and its vendor. Company XYZ’s lender essentially becomes a co-signer on the purchase contract with the vendor.
The differences between the letters of credit and bank guarantees
- Letter of credit is opened with the intention of using it, that is, payment by letter of credit is a phenomenon that occurs during the normal course of events (method of payment). Guarantee is used as a way to ensure obligations and is used if in the process of the implementation of one of the parties of the transaction is not able to meet its own obligations.
- Letter of credit is used as a method of payment in one form or another. The guarantee can cover almost any kind of obligations (the advance payment guarantee, performance of contractual obligations, tender obligations, repayment, payment of customs duty, payment of a fine or compensation fixed by the court, the observance of the guarantee period of equipment, guarantee of the payment of court collateral, guarantee of payment of the transfer a football player and many others.) Area of application of guarantee, thus much wider than in credit.
- Letter of credit is a transferable tool, as it allows to optimize the calculations between the partners. Guarantee in rare cases can be transferable as all that is required to receive funding under the guarantee is the requirement of payment, which makes it a ground for abuse of this tool.
Key Takeaways.
A bank guarantee is a promise from a lending institution that ensures the bank will step up if a debtor can’t cover a debt. Letters of credit are also financial promises on behalf of one party in a transaction and are especially significant in international trade.
Grand City Investment Limited is a Hong Kong based Financial Services Provider that was incorporated on MAY 29, 1984 with Company Registration No. 0137353.
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