An MT760 is a Swift message. Swift is an organization of thousands of banks around the world, it allows the banks to communicate to one another on a host of different issues. In the case of a Swift MT760, it is a message with freezes funds in a depositors account.
A Swift MT760 message is not something that used every day for minor transactions, the transaction value usually is at minimum, US$1 million and up. In major transactions it is not irregular or uncommon for the selling party to know that the buying party has the capacity to pay for the transacted goods or services. To make sure of this the seller will ask his bank to get proof of funds, this is accomplished when the bank sends a Swift MT799 message. The MT799 is normally the first part of a major financial transaction, once the confirmation is received that the funds are available; then a swift MT760 message can be sent to the buyer’s bank freezing the funds.
Bear in mind that Swift messages are between banks, it is basically one bank guaranteeing the other that the funds will be paid upon presentation of documents. Everyone is well aware that banks do not use their own money; they use the money of their depositors. When the bank receives the Swift MT760, the face amount of the transaction is frozen in the account of the buyer. A MT760 is considered a cash backed financial instrument.
A Swift MT760 has a number of uses; large purchases of commodities as well as major import-export transactions are common, however they can be used for any large project.
A Swift MT760 differs from a letter of credit in as much as once completed, absolutely no modifications can be made, this can make for potential difficulties as things do happen such as shipment delays. As well as no amendments, a Swift MT760 cannot be canceled. This method of transacting a deal can be used fraudulently so the parties must be extremely aware of any and all consequences of a Swift MT760.
A number of US banks will not issue a Swift MT760 so it is important that you know your banks position prior to instigating the procedure as you may have to find another bank to work with.
