SWIFT/BIC

What it means

SWIFT, or BIC, is the code identifying a specific bank in international payments. Outside SEPA it accompanies the IBAN or the account number.

Payments often route through intermediary banks, each able to take a fee. So who bears the charges is agreed: sender, beneficiary or shared.

SWIFT is really a messaging network between banks, not an account the money flows through. The money itself moves through the accounts of correspondent banks that have relationships with each other. That is why a bank statement sometimes shows fees from a bank the company has never dealt with.

How it works in practice

For exports outside the EU the contract and the invoice should state the charge instruction precisely. Otherwise less arrives than was invoiced and the gap is chased as a shortfall.

The currency decides whether an exchange difference arises: a foreign currency payment into a currency account is translated at the ECB rate, while bank conversion uses its own rate and margin.

In larger deals outside the EU, a SWIFT payment often does not simply follow the invoice but runs through a letter of credit, where the bank pays only once the agreed documents are presented. For clients with such a deal we ask for the list of documents in advance, because even a small discrepancy in them delays the payment or defeats it.

What to watch out for

A cross-border payment cannot be pulled back like a domestic transfer. With a wrong account number or a fraudulent change of details, recovery takes weeks and may fail entirely.

A payment passing through several banks also passes their sanctions screening. A match of a name, a product or a port with some list is enough for a correspondent bank to hold or return the payment, even though your partner is not sanctioned. The company then waits a month for its money and explains the deal to a bank it does not know.