Changes in SWIFT message standards

Society for Worldwide Interbank Financial Telecommunication or SWIFT operates a worldwide financial messaging network to exchange messages between banks and other financial institutions. Every year in the month of November it upgrades the ‘Message Standards’ to include the latest changes in the domain. This year the changes have been mainly in payments messages. Apart from that a few minor amendments were made to streamline the standards portfolio. The SWIFT Board of Directors reduced the scope of the release keeping in mind the global financial crisis and to minimize the burden on Swift Users.

The changes introduced by SWIFT in the payment messages categories are in :

• 1 – Customer Transfer messages
• 2 – Financial Institution Transfers, and
• 9 – Special Messages

This is due to the regulatory requirements of Anti-money Laundering (AML) and the need to have full transparency on payment originators and cover payments, in the fight against funding of terrorism.

The following important changes have been made in payment messages:

• Additional validation has been applied to field 50F – Ordering Customer in Message Types.
  
  101 – Request for transfer
  102 – Multiple Customer Credit Transfer
  102+ Multiple Customer Credit Transfer - STP
  103 – Single customer Credit Transfer
  103+ Single Customer Credit Transfer - STP
  210 – Notice To Receive, and
  910 – Confirmation of Credit
  
  After these changes messages will be NAKKed if use of this field is non compliant to the existing rules. It will further reduce manual repairs & queries and will improve straight-through processing (STP).
  
• The new general use messages MT 202 COV (General Financial Institution Transfer - Cover) and MT 205 COV (Financial Institution Transfer Execution – Cover) are introduced. In these messages it will be mandatory to include a copy of selected fields from the underlying customer credit transfer sent by cover method. This will allow correspondents involved in processing the transaction to screen payments in line with AML regulations.
  
• MAC (Message Authentication Code) and PAC (Proprietary Authentication Code) trailers are no longer allowed in block 5 of the message.
  
• Where IBAN (International Bank Account Number) validation occurs in MTs 102+ (Multiple Customer Credit transfer – STP) and 103+ (Single Customer Credit Transfer – STP) the country code in the IBAN must be in upper case.

The following messages have been removed from the standards due to non-usage for some years.

• MT 106 - EDIFACT Envelope (Max 9600 Characters)
• MT 121 - MT 121 Multiple Interbank Funds Transfer (EDIFACT FINPAY Message)
• MT 206 - Cheque Truncation Message

The BKE (Bilateral Key Exchange) messages from MT 960 to 967 have been deleted from the system as it has become redundant with the cross over to RMA (Relationship Management Application).

• MT 960 Request for Service Initiation Message
• MT 961 Initiation Response Message
• MT 962 Key Service Message
• MT 963 Key Acknowledgement Message
• MT 964 Error Message
• MT 965 Error in Key Service Message
• MT 966 Discontinue Service Message
• MT 967 Discontinuation Acknowledgement Message

SWIFT has also decided that they will delete the following message categories in the next upgrade.

• 3 - Foreign exchange and Loan / deposit transactions
• 4 – Collections5 – Securities
• 6 – Metals
• 7 -Documentary Credits
• 8 – Travellers Cheques
• N - Common Group

The detailed documentation of the changes can be found in the Standards Release Guide and Message Format Validation Rules.

Contributed By:
Mr. K.R.S. Mani

Question on SWIFT

What are the requirements and dependencies for integrating SWIFT with internal back-office applications ?

Question on SWIFT

What are the Hardware and Software requirements to implement SWIFTNet?

Question on SWIFT

What are the different options available to connect to the SWIFT network?

SWIFT - An Overview contd...

Swift introduced ‘Connect 400’ to plug the problem created by Transmatic Systems. The PC Connect along with Connect 400 was taking care of the message to go from the batchfile to main server and vice versa and renaming the file after the batch is sent. The user can set the timing for scanning at 10 min, 15 min, 30 min etc as per the traffic load. So the time gap between transmissions of message from branch to swift is reduced. SWAP could not upgrade their product to plug this batch renaming problem and was discontinued by some banks and they switched to PC Connect. Now in the year 2000 after Y2K cut over SWIFT started aggressively marketing their new software.

By this time State Bank and Union Bank had upgraded their vax 3400 server with more powerful Alpha Servers which were cost effective and powerful. This ST 400 was running very smoothly and fast in these upgraded Alpha Servers also serviced by Digital and CMC.

Swift Alliance Access and the Swift Alliance Gateway wanted the banks using ST400 to switchover to Alliance suite of products. The platform offered was UNIX and Windows. VMS was scrapped and ST400 software was being phased out. Eventhough ST400 support was there for few more years, they made the banks buy this SAA/SAG by force selling the product.

During that period in the year 2002 Netik company came to India and were giving demos of ‘TurboSWIFT’ software which is an alternate to ST400 and had better features and it was already TCP-IP enabled whereas SAA was not TCP-IP enabled. The SAA vendors - Indigo Technologies went to the extent of giving wrong information and creating doubts in the mind of people about the ‘TurboSWIFT’ which is in fact a SWIFT approved software having better features and a strong audit trail used by many Banks worldwide.

After this Indigo, now taken over by SSI Technologies sold SAA to all the banks using ST400. Banks using Nova swift continued using Nova Swift. Swift then was busy changing the SAK (Swift Authenticator Key) to BKE (Bilateral Key Exchange) and introduced Secure Card Reader for the same. This was used to login and select to swift operations and also in exchanging keys automatically generated by computer. Here the manual exchange of keys was discontinued and all key exchange was automated and secured. After a few years the secure card reader was upgraded to accommodate 32 character security strings and was made more secure and strong.

There was an upgrade on the connectivity to swift and TCP IP enabled connection was introduced. The existing Leased and dial up standby connection to swift access point (SAP) was done away with and all users had to migrate to the new system by subscribing to one of the service providers namely AT & T, Colt, Equant, or Infonet. Majority of the banks signed up with Infonet and very few with AT&T and Equant. Colt had no presence in India.

The concept of digital signatures and RMA (Relationship Management Application) was introduced and implemented and BKE was discontinued. For this they required to install HSM boxes / HSM tokens depending on the volume of message traffic and the RMA Migration Phase 1 and 2 went very smoothly with Union Bank of India being the first bank in India to complete the migration successfully.

The advantages of this system were that the keys were permanent and that no renewal is required. Further selective restriction of tested messages being received can be enforced. Generally this is not done and all banks have test key for all the message types with whomever they are having testing arrangements. In the year 2009 Swift has planned to revise and introduce some message standards in November.

Over these years the swift support for SAA/SAG also saw changes as Indigo was taken over by SSI and subsequently SSI was taken over by Scandent and Cambridge taking over Scandent. In Indian environment support is expected to be given on all working days including Saturday and if need be on site also. Since the AMC is being paid for the software the company retained by swift is expected to give support. But it was surprising that Cambridge was charging extra for support and a contract for preventive maintenance was being taken from banks to give support on site. Now we hear that they want to charge for telephonic support also. Then Swift should not charge such exhorbitant sums for AMC. Further, this concept will not work in India. It is high time all the 15 vendors approved for swift software compete in India, and we have a choice to select the best suited for our requirement and who gives support like how we like to have and not end up paying for even talking to them.

Contributed By:
Mr. K.R.S. Mani

SWIFT - An Overview contd.

SWIFT In India

Reserve Bank of India introduced Swift messaging system in India in 1990 and it became operational in 1991. All Banks were forced to take the system even though it was very costly and the banks were in infant stage of computerization. The World Bank and IMF wanted the system introduced as the Banks in the West were already computerized and wanted the banks in the world to send them computer enabled messages so that it can be automated and manual intervention can be reduced.

At that time worldwide Telex and Telegrams were in use as the best means of communication but they had their own drawbacks and one of the prime focuses of this alternate system was to automate the TELEX messages. SWIFT brought together the Banking community and harnessed the developments in telecommunications and utilized them for international trade and messaging from one country to another in a big way. They could standardize all types of transactions and format the message types to be exchanged between two banks of different countries.

During the introduction of Swift the cost of two servers came to almsot Rs. 1 crore, the motorola codex modems costing 80,000/ each, and the software cost which was additional. The original swift ST 400 package purchased by banks were having both swift and telex messaging facility. In case message did not go through Swift it can be routed through Telex. But this telex function did not work from day 1 due to technical problem with DOT and many banks exchanged this software with PC Connect or taking additional licencce of ST400 for their foreign branches. It was a transformation and a change which simplified the messaging procedure and was easy to operate. THE MESSAGE STANDARDS were modified and changed many times as per the suggestions of the user community:

In the beginning the following hardware and software were available in India.

• Digital company's VAX 3400 servers and VMS operating system. This was serviced by Digital Company and CMC of India.
• 1) ST 200 or 2) ST400 software for swift operations.

Another software is NOVA Swift which was available and it was taken by few banks. Many Banks took ST400 and few of them took ST200 software marketed by Swift SCRL. The support for ST200 and ST 400 were provided by FINLINK, a software support firm. There was branch connectivity software PC Connect. But initially all banks took the main CBT product and simultaneously used the telex as well for communications. The PC Connect was also new and costly.

After initial teething troubles were over banks wanted to connect their branches with swift. Transmatic systems a vendor of telex was marketing SWAP a similar product like PC Connect for branch connectivity and it was working properly and the cost was low as around Rs 25,000/-per connection. The banks went for the same. Here the messages sent by the branch was sent to CBT by dial up mode using PSTN line and it was transported to the main server using batch input/output method. The problem was the messages going twice if the batch were not renamed after use. This was a risk and there was no alternative to it.

To be continued...

Contributed By:
Mr. K.R.S. Mani

SWIFT - An Overview contd.

In 1992 after the successful completion of the pilot scheme during the first half of the year, the Interbank File Transfer (IFT) service goes live on 1 July. By year end, 65 banks have signed up for the service to handle a range of bulk data transfers including mass payments, cheque truncation and internal reporting.In 1993 Security and data integrity are strengthened by introducing smart cards for log-in and bilateral key exchange via the network. A new UNIX-based interface is launched. SWIFTAlliance responds to customers’ needs for multinetwork, single platform processing capabilities.

In 1994 AccordWorkstation, SWIFTAsset Reconciliation, SWIFTAlliance, and USE deployment are a few of many new products and services launched. Infrastructure projects become an increasingly important part of SWIFT's work.

In 1995 SWIFT opens its Frankfurt office. The new Asia-Pacific Council, representing the SWIFT needs of the ever expanding Asia-Pacific region, meets for the first time in Beijing.

In 1996 SWIFT steps up its straight-through processing (STP) drive with a dedicated team and solutions that address the root causes of non-STP-compliant messages. They also introduced the new Ecu Banking Netting Service.

In 1997 Swift announced its plans to introduce and develop SWIFTNet - a family of IP-based products and services.

SWIFT increases connectivity, grows FIN traffic, progresses STP and supports market infrastructure initiatives in clearing and settlement and trade.

In 1998 the SWIFT Board transforms the Securities Board Task Force into the Securities Steering Council. Non-banks — investment managers and securities brokers — are invited to join the Council.In 1999 SWIFT starts the year with euro changeover and ends it ready for Y2K. In between it launches Bolero and wins the GSTPA bid.

In 2000 SWIFT announces plans for two services SIPN, SWIFTNet Link and SWIFTNet PKI, SWIFTNet Interact are deployed while new XML standards methodology is being developed. swift.com is rebuilt and work begins for the e-enabling of customer activities such as ordering and billing.

In 2001 SWIFTNet went live - the Single-window access to and for the global financial industry.

SIBOS cancelled for the firsrt time due to September 11 attacks on the World Trade Center.

On 15 August 2002, SWIFTNet Release 4.0 went live and concurrently the first SWIFTNet FIN message was sent. This date was targeted nearly two years ago and marked the beginning of the SWIFTNet migration. SWIFT successfully drives ISO 15022 migration.

In 2003 Austria adopts SWIFTNet for its domestic payments system. SWIFTNet migration starts with first country window migrations. ISO 15022 migration completed. Italian RTGS moves to SWIFTNet services. MT 103 migration completed. SWIFT yearly traffic reaches the two billion FIN message mark, doubling in volume since 1999.

In 2004 SWIFTNet migration is completed. Corporates are high on the agenda at Sibos 2004. SWIFT Honoured with “Dream Team Award” World’s second largest pension fund adopts SWIFTNet FileAct. ISO 20022 is published and deployment gets underway.

In 2005 X.25 network dismantled. SAP joins over 300 solution providers including IBM, Microsoft and Oracle and announces the company will SWIFT-enable its ERP. TARGET 2 chooses SWIFTNet. Swift focuses industry attention on Giovannini Barrier One. Swift further aims to reduce its pricing by 50% by the end of 2006.

In 2006 the first CEO of SWIFT Carl Reuterskiold passed away. SWIFTNet Phase 2 pilot operation was successful, and it was the year of preparation for TARGET2.

To be continued...

Contributed By:
Mr. K.R.S. Mani

SWIFT - An Overview

Swift is a member owned cooperative society for Worldwide Interbank Financial Telecommunication through which the financial world conducts its business operations with speed, certainty and confidence. Presently over 8,300 financial Institutions, securities institutions and corporate customers in 208 countries exchange 16 million messages daily between them through this messaging system.

The Origin

The ambitious idea of setting up the SWIFT system was conceived by a handful people in 1973. Later it got the support of 239 banks in 15 countries. The objective of the project was to create a shared worldwide data processing and communications link and a common language for international financial transactions replacing the Telex & Telegram.

The fundamental principles and rules defining the liability and responsibility for the SWIFT system were drafted in 1975 and SWIFT went live in 1977 with 518 commercial banks in 22 countries when Albert, Prince of Belgium, sent the first message. In the next year the first SIBOS (SWIFT International Banking Operations Seminar) was held in Brussels with 300 participants. With the increase in popularity Hong Kong and Singapore became the first Asian countries to introduce SWIFT in 1980. The system has got so popular that it reached the milestone of 1000 members within just 16 years of introduction when Banque Nationale de Begique becam its member.

As the technology was also moving ahead very fast the SWIFT sytem has also gone through many changes to make it more robust and safer. 1981 saw the introduction of ST100 interface. Provision of interfaces and software is now handled through a wholly owned subsidiary, SWIFT Terminal services. To cater to the increasing traffic load SWIFT installed a high volume satellite link between its Operating Cantres. It has also developed a value added service named ‘Ecu Netting’ for Ecu Banking Association.

1987 was a breakthrough year for SWIFT as the members voted to expand the user base by including brokers, dealers, exchanges, central depositories and clearing institutions which paved the way for a rapid growth of the member base.

In 1991 SWIFT received the Computerworld Smithsonian Information technology Award for its work in the field of Standardised Financial Telecommunication, recognising that without its system, financial institutions would have been reduced to an unwieldy combination of paperwork and incompatible private networks, restricting their ability to service the international financial flows.

Contd...

Contributed By:
Mr. K.R.S. Mani