Payments Academy
Cash letters and related advices 1 NOW Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 Madrid importer SWIFT Category 4 covers collections, cash letters and related advices, and it exists so that banks can exchange collection instructions and status updates in a standard structured form. Step 1 of 6 Cash letters and related advices 1 NOW Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 Madrid importer SWIFT Category 4 covers collections, cash letters and related advices, and it exists so that banks can exchange collection instructions and status updates in a standard structured form. Step 1 of 6
Shared vocabulary removes ambiguity 1 Cash letters and related advices 2 NOW Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 Madrid importer That shared vocabulary removes ambiguity between banks in different countries. Step 2 of 6 Shared vocabulary removes ambiguity 1 Cash letters and related advices 2 NOW Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 Madrid importer That shared vocabulary removes ambiguity between banks in different countries. Step 2 of 6
Remitting bank confirms by MT410 1 Cash letters and related advices 2 Shared vocabulary 3 NOW Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 Madrid importer The remitting bank uses the MT410 to confirm to the exporter that the collection is now in the hands of the importer bank. Step 3 of 6 Remitting bank confirms by MT410 1 Cash letters and related advices 2 Shared vocabulary 3 NOW Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 Madrid importer The remitting bank uses the MT410 to confirm to the exporter that the collection is now in the hands of the importer bank. Step 3 of 6
MT416 refusal reasons 1 Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 NOW MT416 refusal reasons 5 Remitting bank 6 Madrid importer The MT416 states the reason, such as refusal to pay, insufficient funds, or goods not as ordered, so the exporter can decide the next step. Step 4 of 6 MT416 refusal reasons 1 Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 NOW MT416 refusal reasons 5 Remitting bank 6 Madrid importer The MT416 states the reason, such as refusal to pay, insufficient funds, or goods not as ordered, so the exporter can decide the next step. Step 4 of 6
Remitting bank sends MT430 1 Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 NOW Remitting bank 6 Madrid importer The remitting bank sends an MT430 to change the instruction, for example to reduce the amount from EUR 250,000 to EUR 230,000 after a rebate. Step 5 of 6 Remitting bank sends MT430 1 Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 NOW Remitting bank 6 Madrid importer The remitting bank sends an MT430 to change the instruction, for example to reduce the amount from EUR 250,000 to EUR 230,000 after a rebate. Step 5 of 6
Madrid importer pays in full 1 Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 NOW Madrid importer The Madrid importer pays in full, so Santander sends an MT400 advising payment and remits EUR 249,650 after deducting EUR 350 in charges. Step 6 of 6 Madrid importer pays in full 1 Cash letters and related advices 2 Shared vocabulary 3 Remitting bank 4 MT416 refusal reasons 5 Remitting bank 6 NOW Madrid importer The Madrid importer pays in full, so Santander sends an MT400 advising payment and remits EUR 249,650 after deducting EUR 350 in charges. Step 6 of 6

Flow of the explanation in this lesson.

0:00 / 3:47 Step 1 of 6

SWIFT Category 4 Messages Explained

Documentary Collections and SWIFT Category 4, Lesson 5 of 7, Narration 3:47, D06 Cross-border payments

SWIFTMT400

What you will learn

Your objective. By the end of this lesson, you will be able to explain SWIFT category 4 messages explained. SWIFT Category 4 covers collections, cash letters and related advices, and it exists so that banks can exchange collection instructions and status updates in a standard structured form.

Why it matters. This matters because cross-border payments involve more banks, more charges, more time and more ways to fail than any domestic payment. Getting the chain right is the job.

Chapter objective: Learner explains documentary collections, the roles of remitting and collecting banks, and the SWIFT Category 4 messages used at each stage. Learner uses real examples with amounts, banks and message names to show how the topic works in practice.

Key learning points

  • Cash letters and related advices
  • Shared vocabulary removes ambiguity
  • Remitting bank confirms by MT410
  • MT416 refusal reasons
  • Remitting bank sends MT430
  • Madrid importer pays in full

Key terms

SWIFT: The Society for Worldwide Interbank Financial Telecommunication, a member owned cooperative that provides secure messaging services for financial institutions.

MT400: A SWIFT message used to advise a bank of the collection of a documentary credit or a bill, and to request payment or acceptance.

SWIFT MT message viewer showing SWIFT Category 4 Messages Explained.

Practise this lesson

Exercise

Read the MT400 message described in this lesson and identify its key parts.

Use the message structure, fields and example in this lesson.

  1. What to do. List the main blocks of the message, name the field that carries the amount, and name the field that identifies the payment.

Correct result. The message is made of blocks, each carrying a part of the payment instruction. The amount field and the identification field are the two a receiving bank checks first, because without them it cannot process or reconcile the payment.

Why. A message is only useful if you can read it. The blocks tell the receiving bank what to do, and the amount and identification fields are what it checks first.

Check your understanding

Practice question

Which of the following best describes SWIFT category 4 messages explained?

Takeaway and next step

What to remember

If the importer had refused, Santander would have sent an MT416 instead, and the documents would have stayed with Santander pending new instructions.

Open the message type from this lesson and inspect its fields, then find the field that carries the amount.

Open the ISO 20022 Message Explorer →

Builds on "The Collection Process Step by Step".

Transcript and full text

Show transcript

SWIFT Category 4 is the category for collections and cash letters, and it contains the messages that carry a documentary collection through the SWIFT network. The category includes the messages for the collection instruction, the acknowledgement, the advice of payment, the advice of non-payment, the advice of acceptance, and the free format messages. An SME who works on trade finance must know the Category 4 messages by number and by purpose, because they are the messages that appear in a collection case, and they are the messages a business analyst must specify in a trade finance system. MT400 is the advice of payment. It is sent by the collecting bank to the remitting bank, advising that the proceeds of a collection have been paid, and stating the amount, the value date, and the charges. It is the message that tells the remitting bank to credit the exporter. MT410 is the acknowledgement of a collection. It is sent by the collecting bank to the remitting bank, confirming receipt of the documents and the instruction. MT412 is the advice of acceptance, sent when the drawee accepts a bill of exchange in a D/A collection. MT416 is the advice of non-payment or non-acceptance, sent when the drawee refuses to pay or to accept. MT420 is the tracer, sent by the remitting bank to the collecting bank when the remitting bank has not heard back and wants to know the status of the collection. MT422 is the advice of fate, sent by the collecting bank in reply to a tracer, stating the status. MT430 is the advice of payment for a cash letter, used when the collection is a cash letter rather than a documentary collection. MT450 is the advice of acceptance for a cash letter. MT456 is the advice of non-payment for a cash letter. MT490 is the advice of amendment, sent when the collection instruction is amended. MT491 is the request for amendment, sent by the remitting bank asking for a change. MT492 is the advice of amendment for a cash letter. MT499 is the free format message for collections, used for any communication that does not fit another message type. The message flow in a normal D/P collection uses four Category 4 messages. The remitting bank sends the documents by courier, and the collection is advised by a covering message. The collecting bank sends MT410, acknowledging receipt. The drawee pays. The collecting bank sends MT400, advising payment, and remits the proceeds. The remitting bank credits the exporter. In a D/A collection, the flow adds MT412, the advice of acceptance, sent when the drawee accepts the bill, and the MT400 is sent later, on maturity, when the drawee pays. In a refused collection, the flow uses MT416, the advice of non-payment, and the remitting bank may send MT420, a tracer, if it does not hear back within the expected time. Each Category 4 message has a defined field structure, and the fields carry the collection reference, the amount, the value date, and the charges. The MT400, for example, carries field 20, the transaction reference, field 21, the related reference, field 32A or 32B, the amount, field 33A or 33B, the amount, field 53a, the sender correspondent, field 57a, the account with institution, field 71B, the details of charges, and field 72, the sender to receiver information. The MT410 carries field 20, the transaction reference, field 21, the related reference, and field 25, the account number. An SME should know the field numbers for the MT400 and the MT410 at least, because they are the two messages that appear in every collection. The Category 4 messages are being migrated to ISO 20022, like the rest of the SWIFT messages, but the migration for collections is slower than for payments, because the volume is lower and the documents are physical. A business analyst who works on a trade finance migration should check the CBPR+ usage guidelines for the collection messages, and should plan for a period when the MT400 and its ISO 20022 equivalent run in parallel. The ISO 20022 equivalent of a collection advice is carried in the trade services messages, and the mapping must be specified field by field, because the collection reference and the document references do not have a direct equivalent in the payment messages. For a business analyst, the Category 4 requirement must list each message, its sender, its receiver, and its trigger. The requirement should state that the system generates MT410 on receipt of a collection, MT412 on acceptance of a bill, MT400 on receipt of the proceeds, and MT416 on refusal, and that it generates MT420 as a tracer if no response is received within the agreed number of days. A system that cannot generate the MT400 with the correct amount, value date, and charges cannot close a collection, and the exporter will not be paid.

SWIFT Category 4 is the category for collections and cash letters, and it contains the messages that carry a documentary collection through the SWIFT network. The category includes the messages for the collection instruction, the acknowledgement, the advice of payment, the advice of non-payment, the advice of acceptance, and the free format messages. An SME who works on trade finance must know the Category 4 messages by number and by purpose, because they are the messages that appear in a collection case, and they are the messages a business analyst must specify in a trade finance system.

MT400 is the advice of payment. It is sent by the collecting bank to the remitting bank, advising that the proceeds of a collection have been paid, and stating the amount, the value date, and the charges. It is the message that tells the remitting bank to credit the exporter. MT410 is the acknowledgement of a collection. It is sent by the collecting bank to the remitting bank, confirming receipt of the documents and the instruction. MT412 is the advice of acceptance, sent when the drawee accepts a bill of exchange in a D/A collection. MT416 is the advice of non-payment or non-acceptance, sent when the drawee refuses to pay or to accept.

MT420 is the tracer, sent by the remitting bank to the collecting bank when the remitting bank has not heard back and wants to know the status of the collection. MT422 is the advice of fate, sent by the collecting bank in reply to a tracer, stating the status. MT430 is the advice of payment for a cash letter, used when the collection is a cash letter rather than a documentary collection. MT450 is the advice of acceptance for a cash letter. MT456 is the advice of non-payment for a cash letter. MT490 is the advice of amendment, sent when the collection instruction is amended. MT491 is the request for amendment, sent by the remitting bank asking for a change. MT492 is the advice of amendment for a cash letter. MT499 is the free format message for collections, used for any communication that does not fit another message type.

The message flow in a normal D/P collection uses four Category 4 messages. The remitting bank sends the documents by courier, and the collection is advised by a covering message. The collecting bank sends MT410, acknowledging receipt. The drawee pays. The collecting bank sends MT400, advising payment, and remits the proceeds. The remitting bank credits the exporter. In a D/A collection, the flow adds MT412, the advice of acceptance, sent when the drawee accepts the bill, and the MT400 is sent later, on maturity, when the drawee pays. In a refused collection, the flow uses MT416, the advice of non-payment, and the remitting bank may send MT420, a tracer, if it does not hear back within the expected time.

Each Category 4 message has a defined field structure, and the fields carry the collection reference, the amount, the value date, and the charges. The MT400, for example, carries field 20, the transaction reference, field 21, the related reference, field 32A or 32B, the amount, field 33A or 33B, the amount, field 53a, the sender correspondent, field 57a, the account with institution, field 71B, the details of charges, and field 72, the sender to receiver information. The MT410 carries field 20, the transaction reference, field 21, the related reference, and field 25, the account number. An SME should know the field numbers for the MT400 and the MT410 at least, because they are the two messages that appear in every collection.

The Category 4 messages are being migrated to ISO 20022, like the rest of the SWIFT messages, but the migration for collections is slower than for payments, because the volume is lower and the documents are physical. A business analyst who works on a trade finance migration should check the CBPR+ usage guidelines for the collection messages, and should plan for a period when the MT400 and its ISO 20022 equivalent run in parallel. The ISO 20022 equivalent of a collection advice is carried in the trade services messages, and the mapping must be specified field by field, because the collection reference and the document references do not have a direct equivalent in the payment messages.

For a business analyst, the Category 4 requirement must list each message, its sender, its receiver, and its trigger. The requirement should state that the system generates MT410 on receipt of a collection, MT412 on acceptance of a bill, MT400 on receipt of the proceeds, and MT416 on refusal, and that it generates MT420 as a tracer if no response is received within the agreed number of days. A system that cannot generate the MT400 with the correct amount, value date, and charges cannot close a collection, and the exporter will not be paid.

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