In the world of finance banks need to communicate with one another, without this co-operation the commercial world would be very different than what it is. A primary tool for bank to bank communication is the Swift system, a set series of messages that can be transmitted back and forth with specific instructions and/or questions. A Swift 799 is one of the messages.
Very large commercial transactions are common among commodity traders and those involved in export and import. In an effort to ensure that the seller will be paid by the buyer, in many cases the seller asks for proof of funds. The seller will approach his bank, providing a number of key details regarding the transaction, including of course the value, which is usually well in excess of a million dollars. With this information the bank will request a Swift MT799 to prove the funds for the sale or transaction truly exist in the buyer’s bank.
The Swift MT799 is not a bank guarantee of promise to pay or anything of that nature; it is the precursor to a Swift MT760 which is. When the seller’s bank issues a MT760, then the amount of the transaction, proof of existence having been proved by the earlier MT799 is frozen in the account. This means that the monies cannot be used for any other purpose other than to satisfy payment for the goods or services under consideration.
The MT799 is issued before any contractual details are finalized and a contract is signed between the parties and before a letter of credit or a bank guarantee is issued. When the MT799 has been received back at the seller’s bank proving the funds are available, the seller will send a proof of product to the buyer’s bank and the transaction proceeds.
The traditional methods of actual payment for the goods is normally a letter of credit, a MT103 wire transfer or by MT760 bank guarantee. Upon confirmation by the buyer’s bank that all the documentation is in order, the funds for payment are released and the transaction is final.
There are some banks that hesitate to issue a Swift MT799 for fear of liability. If this is the case you will either have to put up considerable collateral or find a more responsive bank.
