Those who are not involved in the financial services industry may never have heard of swift MT760 services, although most people have heard of Swift, especially if their bank is one of the many thousands of banks that use the system.
The Swift system was developed in the early 1970s and the purpose is to send various pre-conceived messages between financial institutions. The Swift system allows for different categories of transactions to be made, one of which is documentary credits and guarantees. This is where the Swift MT760 service fits in.
An MT760 is a Swift message that acts as a bank guarantee; as such it is a powerful financial tool that is open for malicious manipulation. The MT760 is often used in the import-export business or the commodities sector. The individual or company that wishes to make the purchase instructs his participating bank to issue the MT760 in favor of the company or individual who will be supplying the goods or services.
When an MT760 is arranged, the bank which issues it on behalf of their client immediately blocks the full amount of the funds to cover it in the clients account, thus the funds are not available for any other purpose. Once the MT760 has been issued and the funds blocked; the funds, as they are dedicated to a specific individual or company; become immediately available. It is easy to see the risks associated with this type of financial transaction, it has been used fraudulently many times since its inception. Because of this risk, it is important that the ramifications are fully understood and appreciated.
There is no way what so ever that any of the details associated with the MT760 can be amended, modifies or changed. Once it has been issued, nothing can change nor can it be revoked unless the receiver institutes it.
There are reasonably high charges associated with Swift MT760 services; they can easily reach 1.5% of the value of the transaction. As a result of the potential for huge losses and the high cost of acquisition, many companies prefer to open a Letter of Credit which is a negotiable instrument but it can be revised should there be underlying circumstances and it cannot be negotiated until certain pre-set conditions are met which guarantees that the purchaser receives the goods and then the vendor receives the payment.
