SWIFT MT103 202 Cover payment analysis – part 1

The introduction and analysis of SWIFT cover and serial payments in a previous article provided us with a good foundation to move further. We can now consider concrete examples of SWIFT MT103 202 cover payments, see which parties are involved and the content of the messages that they exchange.

In this article, we will perform a detailed analysis of a MT103 announcement sent by the debtor bank to the creditor bank. Let’s first look at the picture depicting the messages and the different parties.

Image of MT103 202 analysis - MT103 announcement
MT103 202 analysis – MT103 announcement

On the picture, Input and output messages are highlighted to make you aware that the message sent, is not exactly the same received by the receiver. The output messages that SWIFT sends to the receiver, have slightly different formats (See block 1 and block 2 definitions) than input messages.

What you see on the picture is a payment that a company in France, customer of BNP Paribas in Paris, wants to send to another company in Spain, customer of Banco Santander in Madrid. The payment is in USD currency. 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 BNP Paribas is Wells Fargo and the correspondent of Santander is Bank of New York Mellon. In any case, BNP Paribas sends a combination of SWIFT MT103 202 Cover messages for the transfer.

[box type=”info” size=”large” style=”rounded”]Major Banks in general create subsidiaries in other currency zones that they use as correspondents. Santander for instance would use Santander New York instead of Bank of New York as correspondent.[/box]

The table below contains the fields that are transported in the MT103 announcement 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 first message in the combination (of SWIFT MT103 202 Cover) that is analyzed in detail below is the MT103 announcement.

Narratives and notes on this SWIFT MT103 announcement message

As usual, there is a lot to say about this SWIFT MT103 announcement message. The following narratives and notes allow to get a deeper understanding of the message content.

Narrative and note 1 (Main purpose of this SWIFT MT103 announcement)

The Sender (BNPAFRPP) is informing / announcing to the Receiver (BSCHESMM) that funds are coming for a specific customer. The funds will be credited on receiver’s USD account  with its correspondent IRVTUS3N.

Narrative and note 2 (Presence of fields 53a and 54a in this SWIFT MT103 announcement)

The presence of the Tags 53A and 54A indicate that there is no account relationship in USD, the currency of the transaction, between sender and receiver.

Field 53A indicates the Bank which is to provide the funds to the Receiver on behalf of the Sender.

Field 54A is the receiver’s correspondent, the Bank that will receive the funds on behalf of the Receiver.

Sender’s correspondent bank does not have account relationship in USD with the Receiver (BSCHESMM), therefore, Receiver’s correspondent bank must be added to the chain (54A:IRVTUS3N).

Narrative and note 3 (Absence of fields 52a and 57a in this SWIFT MT103 Announcement)

There is no ordering institution (52A) in the message. So the ordering customer is customer of the Sender.

There is no account with institution (57A). It means that the Beneficiary customer account (:59:/ES6300491800132710387658) is hold by the receiver.

Narrative and note 4 (The charges)

Details of charges (Tag 71A) is SHA. The charges are shared between Ordering and beneficiary customer. Sender pays charges to ordering bank. Beneficiary pays charges to receiving and other intermediary banks.

This ends our analysis of the MT103 Announcement. We made an important step. But that is just one message in the combination of SWIFT MT103 202 Cover. You certainly want to look at and analyze the MT202 COV message as well. That will be the subject of the next article.

74 thoughts on “SWIFT MT103 202 Cover payment analysis – part 1”

  1. Thanks for your articles, I find them very well explained.

    I’m working on a project related to SWIFT messages and I have a few questions:
    1. In this example, who is deciding which correspondents to use? E.g. how did BNP knows that Santander has a correspondent in US? And is it the case that there are maximum 2 correspondents in the chain of payment?
    2. Are there any way to determine whether a MT103 message is an cover announcement or serial message based on some fields?

    Any reply is appreciated, thanks in advance!

    Best Regards,
    James

    1. Hi James,

      Thanks for your interest. Your questions are interesting. 🙂
      1. Routing in Xborder payments is pretty complex. I will just give you a hint here.
      It is called Standing Settlement Instructions. Banks do share information about their correspondents in specific messages (MT670 and MT671).
      Information extracted from those messages are stored in payments engines and use among other for routing.
      Check the SWIFT documentation about these MT670 and MT671. It can help.

      2. The answer is unfortunately no. One principle for cover and announcement in Europe is: When the bank have direct relationship with the receiving bank, a serail payment is used. If not, it is a cover payment. It is by processing the payment that you find out where the funds should come from and then deduct if it is a cover or a serial. Read the article about serial and cover payments if not done yet.

      I hope this helps.

      Br, Jean Paul

      1. Hi Jean,

        You mentioned “When the bank have direct relationship with the receiving bank, a serial payment is used. If not, it is a cover payment”.

        In this statement, are you referring to BNPAFRPP (sender) and BSCHESMM (receiver)?

        If No, then which banks are you referring?

        If yes, then the question is, even this payment scenario you showed is also possible serially as well as you showed in serial part 1/2/3.. In this case, what is the key factor which determines whether to go for cover or serial?

        I hope I was able to put my thoughts clearly to you. Appreciate your response.

        1. Hi Shadab,

          Yes I am referring to BNPAFRPP (sender) and BSCHESMM (receiver).
          If they have an account relationship in the currency of the transaction, no need to go through a correspondent.
          BNPAFRPP can just ask BSCHESMM to debit its account and credit the final beneficiary account.
          But since in this example they do not have an account relationship, they need intermediary to settle the transaction.

          Now when you do not have an account relationship with the receiver, you still need to choose between serial and cover method.
          What will determine the choice? Agreement with beneficiary bank, practices in your region, …
          In the USA for example, Serial method is the standard. But in Europe it is the cover method.
          There are many paramters to take into account.

          I hope it clarifies a bit.
          BR, Jean Paul

          1. Hi payment by 103 from europe and confirmation by 199 intermediary bank in usa going to china is that correct or it has to be confirmation by 202

          2. Hi Thomas,
            Is it a serial or a cover payment? MT199 is usually used to ask a question about a message, not to send a confirmation.
            Waiting for your answer.

          3. Jean ,suppose bank A sends MT103 to bene bank B. AND BANK B FAILS TO APPLY. if bank B send s mt 103 back to sender bank A to return funds.what will happen.will the funds get returned ,

        2. Hello All,

          I have one question as how we can analyze that 202 cover has bee sent for respective 103.will the reference be same for both statements. Or what will be the common. Between two.

          1. Hi, The Field 21 (Related Reference) of the MT202 COV contains the Field 20 (Transaction Reference Number) of the MT103 Announcement.
            In the standard, you read this in the usage rules: If the related message is an MT 103 Single Customer Credit Transfer, this field 21 will contain field 20 Sender’s Reference of that MT 103.

      2. Hi Jean, please can you help me understand a how a MT202COV payment works with an example.

        2. How are cross border payments handled? Does this require a MT103 and a MT202COV

  2. Hi Jean,

    Thanks for your reply. So I suppose the whole route from the ordering FI to beneficiary FI is determined by looking up sort of a directory? And the maximum number of correspondent banks is then 2? or there can be more?

    James

    1. You are right on both questions. 🙂
      Directories are used to determine the route.
      As far as I remember (not 100% sure so someone can comment on this): in SWIFT messages, you can have one intermediary for serial payments and up to two for cover payments.
      However (this is my experience), there are cases where more than 2 intermediaries are determined after applying the routing algorithm.
      The transaction then goes to repair and someone fixs it manually so that it becomes compliant.
      I hope this helps.

      Jean Paul

  3. Hi Jean

    This is a really helpful article, although I am still rather confused.
    I actually have a few questions with regard to fund redemption. Say for example a client is based in Hong Kong and invested into two USD money market funds (offshore), with two different fund managers and they wanted to place a redemption trade on both funds. They place a redemption order at 12.05pm HKT (on their Bank A cash account),
    1) would this trigger an MT103 to the funds directly? how would that work diagrammatically?
    2) does the FED need to be open in order for the MT202 to be issued by the correspondent bank
    3) is there any way that the correspondent bank of one of the fund managers would be able to process the MT202 quicker than the other or before the FED open (i.e. an early batch run processing for Asia time) to make sure that funds get credited same day in Hong Kong?
    4) under what scenario would a bank credit a clients account immediately based on the MT103 rather than awaiting the MT202?
    5) How would a transfer agent factor in all of this?

    Sorry thats a lot of questions! I hope it makes sense, as I’m quite baffled!

    1. Hi,
      I am not an expert in fund redemption. The article is about transfer of funds between banks through the correspondent banking network.
      Let me try to answer your questions.
      1) To transfer the funds, an payment order must be executed. I can’t tell you when it is triggered. The process might require other conditions to be fulfilled.
      2) The answer here is clearly no. There are 2 possibiliites here: Either a MT202 is issued and sent to the next bank (sending bank has an account relationship with receiving banks) or a payment message is exchanged through a local clearing system and settled in Fedwire.
      3) I would say it depends on when the order is received. Usually the bank that executes the order indicates by when the order should reach the bank and how long it needs to credit the beneficiary account.
      4) Trust. The bank knows the customer and the correspondent particularly if they have been in business for long. He can credit the customer before the funds arrive.
      5) If a transfer agent comes in, he will probably receive the funds before giving them to the ultimate beneficiary and take a commission.

      I hope this helps.

  4. Jean thanks a lot for the articles.Very well explained.

    Can you please help me to understand the concept of F52.

    1. When will F52 come in picture & when it wil not?

    Explanation with a example will really help me to get my concepts cleared

    1. Hi,

      thanks for your appreciation. It is pretty simple to understand when F52 is present. Here is what you read in the SWIFT standards about F52: This field specifies the financial institution of the ordering customer, when different from the Sender, even if field 50a contains an IBAN. So F52 is populated when the sender of the message is not the ordering customer Bank. When F52 is not in the message, it means that the sender is also the bank of the ordering customer. I hope this helps.

      1. Sir. One account transfer from us bank to germany another bank account via 103 202 swift transfer. Last Saturday they send but still not recived in reciving account . Sir can u give any help this transaction. U say yes ill give all details sir very urgent thank uu

  5. Dear Sir,

    I have a customer who made me a 103dowload payment, I have copies of SWIFT 799/103/202, but this money never got me on my company account, and he is telling me that a bank officer needs to download the funds, I do not know what to do my bank says that the money does not see them in the SWIFT system, HOW CAN I CHECK AND WHAT I SHOULD DO.

    1. I have a customer who made me a 103dowload payment, I have copies of SWIFT 799/103/202, but this money never got me on my company account, and he is telling me that a bank officer needs to download the funds, I do not know what to do my bank says that the money does not see them in the SWIFT system, HOW CAN I CHECK AND WHAT I SHOULD DO.

      Please educate me how does this manual download work

  6. Hi paul,
    When the beneficiary bank reciever recieves the MT103 but didnt recieve the 202 will there be a issue in crediting the funds to the beneficiary account. How to recieve the MT 202 to the beneficiary bank?

    1. Hi John, the answer to your question is clearly Yes there is an issue. The MT103 does not carry the funds. It just announces that funds are coming. If the MT202 COV is not received, it means the funds have not arrived yet. Some banks know their customers and might credit the funds upfront. But that is not systematic. The standard process is to wait for the MT202 COV to come and then to credit the beneficiary customer.

      1. There are primarily two scenarios wherein beneficiary bank would provide upfront credit to beneficiary prior to receiving funds themselves within MT202 COV message.

        1) As we all know there are two broad categories of payment systems basis settlement mechanisms i.e. Gross & Net Settlement.

        In payment systems where Settlement mechanism is performed in Real time & independently for each transaction (i.e. in Gross) those systems are referred to as RTGS systems.

        In payment systems where Settlement mechanism is performed in batches by grouping multiple transactions then only Net amount post deducting amount that our bank owes to other bank (i.e. Net amount) is settled & these are mostly low value system. For e.g. NEFT in India

        Now one of scenario wherein beneficiary bank would provide upfront credit to beneficiary prior to receiving funds themselves within MT202 COV message would be in a system referred to as “RTFS” i.e. Real Time Final Settlement system.

        Examples of such systems are :- a) IMPS in India

        b) CHIPS in USA
        c) LVTS in Canada
        d) NPP in Australia (LV)
        e) Faster Payments in UK (LV)

        2) The Second Scenario where beneficiary bank would provide upfront credit to beneficiary prior to receiving funds themselves within MT202 COV message would be Relationship that particular bank may have with that customer & also banks’s internal policies (customer service vis-à-vis risk prioritization).

        Hope this helps.

  7. Hello

    I have a couple questions in regards to MT103/202 access to fund collection – i am aware we would have to utilise a terminal but which one in order to access this?

  8. Hi Paul,

    Can you guide me on the mapping to mt202 COV for below 2 scenarios. A quick reply is highly appreciated

    1. 53a, 54a and 56a , 57a in MT103 and

    2. 53a, 54a, 55a, 56a and 57a in MT103 (rare case but possible)

    My assumption is as below for mapping in MT202 COV. please let me know if i am correct

    1. receiver, 56a, 57a and 58a

    2.receiver, 54a, 56a, 57a and 58a

    Thanks
    RSR

    1. Hi Prudhvi,
      Thanks for reaching out! I have a problem with the info you provided.
      In MT103, you can either have 53a / 54a / 55a if it is an annoucement. Or you can have 56a /57a if it is a serial.
      You cannot have all of them as far as I know. So please check your scenarios again.
      Regards,
      Jean Paul

      1. Hi Paul,

        I know its not a typical scenario.

        I will encounter this issue if i am populating all the parties from SSI, at max it can have 3 parties to reach beneficiary institution. Now i am having sender , sender corresondent, 3 parties (correspondent and intermediaries from SSI) and benificiary’s bank.

        And suppose if i am sending this message in cover mode. my mapping would be atleast assuming to be

        sender
        53a – Sender correspondent
        54a – Correspondent (of intermediary 2)
        55a – Intermediarr 2
        56a – Intermediary 1
        57a – beneficiary bank

        This is the only way for me if i want to populate all the parties (else i have to ignore Intermediary 1)

        Nice discussing with you, as always

  9. Hi Jean,

    How you Payment Instruction and Settlement Notification happens in this Direct and Cover Payment?
    Your answer will be much Appreciated.

  10. Hello need SWIFT Software to flash a bank account , i will be very great if you can response as soon as possible

  11. I need a software that can be used to flash Account in a any particular Bank to receive SWIFT telegraph of Incoming Funds.

    1. Hi, Yes. It is possible to receive MT103/202 everywhere in the world.
      The Receiving bank should be participant of SWIFT and there are many banks in Kenya that are live on the SWIFT network.
      So not sure, what you are asking exactly.

  12. Hello Jean, I would like to know why huge payments from Europe to Africa requires the banks exchanging keys on SWIFT and talking about manual SWIFT download.

    Kindly explain.

    1. Hi, The exchange of keys through the SWIFT Relationship Management Application (RMA) is pre-requisite for the exchanges of messages over the SWIFT network. Pertaining to manual SWIFT downmoad, I do not know what it is. If you find the answer, please do share it with the community. Thanks.

      1. Hi Jean,
        I continue the question you answered above, does MT-999 for exchanging key needed before MT-103? for example let say Sender bank has no relationship with Receiving bank before, so do they need to do a key exchanging first before sending MT-103 or Sender bank can directly execute MT-103?

        Has MT-999 ever needed for any reason in conducting MT-103?

        I hope you would explain this matter when you have time.

        Best regards

  13. Good day Jean Paul.I have a very urgent request,Need receiver in France must have Agri-Cole account with the capacity to receive $10B
    Contract will immediately be provided after receiver provides CIS

    25% receiver
    5% commission to share 2.5% each side
    70% sender
    Real money MT103

    Then after receiver provide CIS
    We will provide official contract with commission agreement etc

    So after this is signed you guys provide CIS we confirm if account is strong enough to receive the
    $10B

    Then we issue final contract with commissions agreement
    Done deal!
    MT103 Swift transfer..

  14. hi,
    can any body help how to download funds from mt103/202 to my business account as i got all codes with me,when i spoke to my bank they said in india there is no manual download process.pls help some one who can do this work i can share some percentage

  15. Hi,

    I have a question….

    I got a swift from my client and it says FIN 103 SINGLE CUSTOMER CASH TRANSFER…. is that the same as SINGLE CUSTOMER CREDIT TRANSFER….

    i dont know anything about this so if you can help … thanks

  16. Hi Jean Paul,
    im assuming you work for a bank…. I have a very large client that needs to process DTC’s and MT-103-202 transactions. I would like to see if we might be a fit, can you please call me or text me at 805-907-8703 ask for Alan

    -Thank you

  17. i have a swift message from HSBG for another bank at a caiman, who transfers is an off shore and who receives is also. how can I replace the recipient, because he owes me the money he is receiving?

    1. Impossible to replace the recipient once the payment has been sent over the SWIFT network.
      The only option is that the recipient sends you the money after his account is credited.

  18. Hello,

    If bank is located in EU and want to send USD to US, why it is not allowed to send USD to US with cover? Banks in US usually cancel cover and inform that they are not able to forward cover to other US bank. Why it is like that ?

  19. Dear Jean Paul,

    Excellent article in understanding the how the cover payments work. You are doing a great job with the lucid explanation of the concepts involved.

    Had a doubt regarding foreign bank maintaining subsidiaries in the Other currency Zones, to facilitate the transfer process. As you correctly mentioned Santander for instance would use Santander New York instead of Bank of New York as correspondent.

    The question is Santander New York mandated to sent MT103/MT202 via the swift network when they can directly sent the another means of messaging (Internally used with in Santander) for communicating the credit details? Will this not save the costs involved?

    1. Hi John, Thank you for your comment.
      You are completely right that instructions can be sent through a secure internal network, in general a hub set up by the bank.
      This would not go through SWIFT and the bank will save some costs indeed.
      To keep things simple, banks would also send the instructions internally using the SWIFT MT format.
      So it means, you can send SWIFT MT format without going through the SWIFT Network. That is pretty common in practice.

  20. Hi, Paul. I also read a SWIFT 103 saying FIN 103 SINGLE CUSTOMER CASH TRANSFER in head block, I wonder if it’s allowed to use word CASH instead of CREDIT here according to SWIFT rules. Thanks

    1. I have a page where you find all information about Header information. Are you referring to a specific field in the header block?

  21. Dear Mr. Jean,

    Could you possibly advise about MT103/202 SDD b2b manual download.

    I am quite confused, what manual download represent in this transaction of funds, and I can’t find appropriate answer online.

    Kind Regards,

    Milos

  22. Hi Mr. Paul,

    I have a question regarding MT 202.
    Is it possible to issue a MT 202 for payment of a contract and add a condition on it?
    I mean Can we issue a conditional MT 202 to account of a company and only after receipt of a specific document, for example in our case after receipt of Bill of Lading, the money be received in their account?

    and May I know how long does it take for the money to be transferred by using MT 202?

    1. Hi,
      As for as i know, the answer is no. Once the MT202 is issued, the beneficiary should be credited.
      Documentary remittances and credits are used to put a condition on a payment. But other types of SWIFT messages are used for that, not the MT202.

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  25. Hi Jean there was one question asked in one of the interview like 53a and 54a of Mt103 is mapped into which tag of mt202cov.

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