MT202 OR MT103

QUESTION

Dear Mr Old Man,

On the occasion of New Year, may you and your family with all the best wishes.

Today I have a question related to Collections.

One month ago, we sent a full set of documents and our instructions under Collection D/P to Bank A in Spain. After a month of no information, 2 days ago we received MT103 from Bank A for the fund in favour of the Ben. with the amount as same as in the above mentioned D/P. But as informed from the Ben. we know that the fund under above MT103 is for the Collection.

Under URC 522 – article 16b “the collection bank will effect payment of the amount collected in favour of the remitting bank only” (that means, not in favour of the Ben.). Therefore, if Bank A made payment for the Collection, they should use MT202 for the fund in favour of our Bank.

I had sent message to claim Bank A of not payment for the Collection and get answer from Bank A that the above fund under MT103 was for the Collection.

Do you think that Bank A has acted in a wrong way?

Best regards.

Emily

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ANSWER

Dear Emily,

It is agreed that MT103 is used to convey a fund transfer instruction in which the ordering customer or the beneficiary customer, or both, are non-financial institutions from the perspective of the sender. This message must not be used to advise the remitting bank of a payment for a collection.

MT202 is used to order the movement of funds to beneficiary institution. The collecting bank under a documentary collection should pay in accordance with the remitting bank’s instructions and should use MT202 and not MT103. However, where the beneficiary remits the documents for collection directly to the collecting bank (with no remitting bank involved), the collecting bank can use MT103 to effect the payment to the beneficiary’s account as instructed.

In your described case, Bank A was wrong when effecting the payment to beneficiary.

Best regards,

Mr. Old Man