> On Wed, 20 Aug 2008 06:07:46 -0700 (PDT), Pits gmail.com>
> wrote:
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>>Some loop holes being closed  (and about time )

>

>>FYI  Aus Aviators :)

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>>As this year’s SIBOS approaches, it seems one of the major concerns
>>for bankers at last year’s conference will be addressed shortly –
>>improving the transparency of cover payments.

>

>>A cover payment is a transaction in which an originating bank does not
>>have a settlement relationship with a beneficiary’s bank in another
>>country and does not have a correspondent bank in that country, so has
>>to go through a covering party. Presently, some information is
>>conveyed to the beneficiary bank but not to the covering party,
>>hindering its ability to carry out AML checks.

>

>>“In SIBOS last year, a lot of people were talking about it. There were
>>a number of solutions being explored, but nothing finalised at that
>>point,” says Abdul Raof Latiff, executive director and head of
>>clearing and foreign exchange at JPMorgan Treasury Services Asia
>>Pacific.

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>>However, SWIFT has since agreed to create a new standard, the MT 202
>>COV format, which will be introduced in November 2009, following a
>>consultation period ending on September 17. It will require more
>>information about the ordering party and final beneficiary –
>>information that is not currently included in the MT 202 message type.

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>>“I now have more details which I can evaluate and verify further
>>before I make the payment, which makes the checks a lot easier,” says
>>Latiff. “It doesn’t completely eliminate the exposure but it manages
>>it much better.”

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>>This means banks need to adapt their systems to handle the new
>>messaging format, ahead of the deadline next year, requiring
>>investment in technology and processes.

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>>“From a technology standpoint, it’s not a lot of money, depending on
>>how the banks are organised,” says Latiff. “However, from an overall
>>end-to-end rollout perspective, there’s a lot of time being spent on
>>making sure that the process is as smooth as possible.”

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>>Despite these improvements, there are still further issues to be
>>addressed when it comes to cover payments, says Steve Bash, executive
>>vice president, head of Wells Fargo global correspondent banking.

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>>“Perhaps the greatest challenges to cover payments are the potential
>>delays by the covering bank in actually funding the beneficiary bank,”
>>he says. “Another possible issue could be that the beneficiary bank
>>may have closed its relationship with a specific covering party and
>>failed to send a corresponding SWIFT broadcast message. In this case,
>>the originating bank’s routing tables may not reflect the most up-to-
>>date and accurate information.”

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>>Bash says cover payments, as well as serial payments - in which the
>>originating bank has no account relationship or SWIFT authentication
>>key with the beneficiary bank, so sends it through an intermediary
>>correspondent with which it has an account and authentication
>>relationship – have an important part to play in a bank’s strategy to
>>provide coverage in several markets. It can make sense to use a cover
>>or serial payments for some transactions, especially if the volume of
>>business in a particular region or country is low.

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>>“For instance, a smaller bank with a limited number of yearly payment
>>needs to a developing country might justify the opening and
>>maintaining of an account in that country, but it could be more cost
>>effective to take the serial or cover approach,” Bash says.

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>>With cover payments set to remain an integral part of the global
>>payments network, improvements in transparency will give more
>>confidence to all banks involved. Conversely, a failure to implement
>>the new COV messaging protocol by the deadline could be costly for
>>Asian financial institutions with international ambitions.

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>>“A number of Asian banks are applying for licences in the US, so for
>>them this is an important area to consider from a payments
>>infrastructure standpoint,”

>
> Interesting-
> Despite assurances from the bank at our end that all fees were
> included, the recipient still "lost" a little from the transaction at
> her end. I sent the details from this end so she could track it at her
> end, but haven't heard anything back.
> She was happy to accept the small deduction, as it wasn't very
> significant, but she would still liked to have known where that money
> went. Maybe this will help to overcome that problem,
>
> Coop