![]() ![]() Messages sent by the collecting bank (so received by the remitting bank) In the coming paragraphs, we will consider each message and see when it is sent/received by the involved parties. The MT400, when it transports funds, can be settled through correspondent banking or a clearing system. In other words, the MT400 can be exchanged, cleared and settled through a CSM but not the other messages. All the messages except the MT400 must be exchanged directly over the SWIFT Network without going through a clearing system (CSM). It receives SWIFT MT400, MT410, MT412, MT416, MT422 messages and sends SWIFT MT420, MT430 messages. Consequently, the remitting bank does exactly the opposite. The collecting bank sends SWIFT MT400, MT410, MT412, MT416, MT422 messages and receives SWIFT MT420, MT430 messages. Now that we understand what collecting banks and remitting banks are, let’s consider the SWIFT messages that they exchange. But this example is good to grasp the main concepts. Things might be more complex in the reality. In practice also, the collecting bank may not be the buyer’s bank and the remitting bank may not be the seller’s bank. The collecting bank is usually the correspondent of the remitting bank in the buyer’s country, but that may not be the case. It is called a collecting bank primarily because it collects the funds. The collecting bank is the bank that, in documentary collections, presents the documents received from the remitting bank to the buyer and collects the payment from him. ![]() It is called remitting bank primarily because it remits the documents (habitually through national or international shipping and courier delivery services). The Remitting bank is the bank that, in documentary collections, forwards a seller’s shipping documents to the collecting bank and receives the payment from the collecting bank on behalf of the seller. ![]() After payment, the collecting bank delivers the payment received to the remitting bank for final delivery to the seller. The buyer must accept the collection order (usually a bill of exchange) or pay before the collecting bank releases the title documents required for the buyer to take possession of the goods. The remitting bank forwards the documents to the buyer’s bank, the collecting bank. The seller after sending the goods and services hands over all the related shipping documents to his bank. The buyer and seller as well as their banks are usually located in different cities/countries. In short, this is how it goes: Buyer and seller make a business transaction and to secure the payment, the seller asks his bank to collect the funds against shipping documents. A documentary collection is a transaction whereby an exporter/seller entrusts collection of a payment to the remitting bank (exporter’s bank), which sends the shipping documents to a collecting bank (buyer/importer’s bank) together with payment instructions. ![]() What is depicted on the picture is a payment technique called documentary collection or documentary remittance.
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