Swift Messages in Letters of Credit

What does SWIFT mean in trade finance? SWIFT is the short form of " S ociety for  W orldwide  I nterbank  F inancial  T elecomm...

What does SWIFT mean in trade finance?

SWIFT is the short form of "Society for Worldwide Interbank Financial Telecommunication". Swift defines its role in international financial transactions on its website as follows. “Our role is two-fold. We provide the proprietary communications platform, products and services that allow our customers to connect and exchange financial information securely and reliably. We also act as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest.” 

In simple terms swift has two main roles in international financial transactions, firstly SWIFT provide a secure communications platform by which financial institutions can communicate each other reliably and fastly and secondly SWIFT establishes standard message formats which can be used on secure SWIFT platforms. Today banks use SWIFT platform to communicate each other when sending a wire transfer, issuing a letter of credit, advising a discrepancy message etc. Each of these message formats have a different code, which is called swift message types. For example a bank must use MT700 Issue of a Documentary Credit when issuing a letter of credit and MT 734 advice of a refusal when giving its refusal message. (MT means Message Type)

On below table you can find main swift  message types used in letters of credit transactions.

Message Type	Explanation
MT 700	Issue of a Documentary Credit
MT 701	Issue of a Documentary Credit
MT 705	Pre-Advice of a Documentary Credit
MT 707	Amendment to a Documentary Credit
MT 710	Advice of a Third Banks Documentary Credit
MT 711	Advice of a Third Banks Documentary Credit
MT 720	Transfer of a Documentary Credit
MT 721	Transfer of a Documentary Credit
MT 730	Acknowledgement
MT 732	Advice of Discharge
MT 734	Advice of a Refusal
MT 740	Authorization to Reimburse
MT 742	Reimbursement Claim
MT 747	Amendment to an Authorisation to Reimburse
MT 750	Advice of Discrepancy
MT 752	Authorisation to Pay, Accept or Negotiate
MT 754	Advice of Payment/Acceptance/Negotiation
MT 756	Advice of Reimbursement or Payment

Important Note : According to the current letters of credit rules, UCP 600, a letter of credit will be deemed to be operative letter of credit if it is transmitted via an authenticated electronic platform such as SWIFT.