Worked Example: A Returned EUR 50,000 Payment with a Partial Amount and Charges

The payment starts in London, where a property company called Thames Estates pays EUR 50,000 to a contractor in Paris called Seine Renovations, for work on an office building. Thames Estates banks with Barclays in London, and Seine Renovations banks with BNP Paribas in Paris. Barclays sends a pacs.008 for EUR 50,000 through the SWIFT network, BNP Paribas receives it, validates it, and credits EUR 50,000 to the Seine Renovations account. At that moment the payment is settled, the beneficiary holds the funds, and the timing test gives its answer. Any problem from now on must be handled as a return, not a reject, because the creditor account has already been credited. Two days later, Seine Renovations discovers that Thames Estates paid the wrong invoice, and that only EUR 30,000 was actually due for the work completed so far. Seine Renovations instructs BNP Paribas to return EUR 30,000 to Thames Estates and to keep EUR 20,000, which covers the work already done. BNP Paribas cannot send a pacs.002, because the payment was not rejected, and it cannot simply reverse the original credit, because the pacs.008 is already settled. It must create a new settlement instruction, a pacs.004, for the partial amount of EUR 30,000, with the original EUR 50,000 recorded as the Original Interbank Settlement Amount for reference. BNP Paribas also applies its return charge, and the charges elements in the pacs.004 record that deduction. BNP Paribas charges EUR 25 for processing the return, so the Returned Interbank Settlement Amount becomes EUR 29,975, which is EUR 30,000 less the EUR 25 charge. The pacs.004 carries the charges amount, the bearer, and the agent that deducted it, so that Barclays in London can explain the shortfall to Thames Estates. If those elements were missing, Thames Estates would see EUR 29,975 arrive against a EUR 30,000 expectation and would raise a query, and Barclays would have no evidence to answer it. The charges elements turn a confusing shortfall into a documented deduction. The pacs.004 also carries the settlement method and the return chain, and both matter for the settlement that follows. The settlement method is INDA, which tells Barclays to settle the return by debiting the account of the instructed agent, namely the euro account that BNP Paribas holds with Barclays. The return chain lists BNP Paribas as the returning agent, Barclays as the previous agent, and Thames Estates as the ultimate debtor, so every bank in the chain knows the route the return must follow. Barclays receives the pacs.004, debits the BNP Paribas account for EUR 29,975, and prepares to credit its customer, Thames Estates. Barclays credits EUR 29,975 to the Thames Estates account, and it sends a statement entry that shows the original EUR 50,000 payment, the EUR 30,000 partial return, and the EUR 25 charge deducted by BNP Paribas. Thames Estates now holds EUR 20,000 with Seine Renovations for the work done, it has recovered EUR 29,975 of the overpayment, and it has paid EUR 25 in return charges. The lesson is that a return is a new payment with its own economics, not a simple undo button, and teams that treat the pacs.004 as a fresh instruction, with its own amount, its own settlement method, and its own chain, will reconcile it first time, while teams that treat it as a reversal will post the wrong amount or lose the charges.