> On Wed, 20 Aug 2008 06:07:46 -0700 (PDT), Pits gmail.com>
> wrote:
>

>> Some loop holes being closed (and about time )
>>
>>
>> FYI Aus Aviators :)
>>
>> 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.
>>
>> 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.
>>
>> “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.”
>>
>> 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.
>>
>> “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.”
>>
>> 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.
>>
>> “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.”
>>
>> 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.
>>
>> “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.
>>
>> 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.
>>
>> “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