Telegraphic transfers and bank drafts

Transcription

1 Telegraphic transfers and bank drafts

2 Businesses and individuals frequently need to transfer funds abroad in payment of goods or services provided by an overseas supplier. These transfers are a convenient means of settling foreign debts which do not warrant the security offered by other payment mechanisms such as documentary credits or collections. Usage These transfers are used to settle foreign debts arising from contracts involving services or the movement of goods, generally referred to as trade transactions, or other obligations such as congress, seminar or conference fees; subscriptions and repayments of loans or interest. Settlement of foreign commitments can be done either by means of a telegraphic transfer or draft. Telegraphic transfer Telegraphic transfers simply entail the remittance of funds between banks using electronic coded messages. The message provides the receiving bank with such information as the currency and amount, the value date of payment, the beneficiary name and payment instructions. Messages are despatched via an electronic communication system known as SWIFT (Society for Worldwide Interbank Financial Telecommunication). Procedure To make a payment by way of a telegraphic transfer the sender completes and signs an Application to purchase foreign currency which incorporates a Cross Border Foreign Exchange Transaction reporting form. The sender hands the application form and commercial documents, such as a commercial invoice and transport document, to the bank. Based on the reason for the payment the exchange control authorities specify what documents the sender must give to the bank. The bank uses a spot foreign exchange rate (telegraphic selling rate) to convert the rand to foreign currency. Based on the information given, the bank captures the data into their computer system and sends the SWIFT message. Advantages The benefits attached to the use of telegraphic transfers are: Speed SWIFT messages are delivered to the receiving bank on the day of despatch. However, payment will be effected on value date only, which, in terms of international banking practice, is two business days from date of the transaction. Safety The SWIFT system has built-in security features which makes it a safe, reliable method of transferring funds electronically. Convenience The simplicity of the operation coupled with the efficiency and security factors make teletransmissions a convenient way of remitting funds internationally. 1

3 Special considerations Countries throughout the world have prescribed cut-off times for the receipt of telegraphic transfers. The cut-off times vary from country to country and from bank to bank. Funds are transferred worldwide within the internationally accepted norm of two business days value. Bank draft A draft can be likened to a cheque and is a negotiable instrument issued by Standard Bank. The item instructs a foreign bank to pay on demand, a fixed sum of money, be it in rand or a foreign currency, to a named beneficiary. Procedure The procedure for obtaining a bank draft is identical to that used in requesting a telegraphic transfer. The sender completes and signs an Application to purchase foreign currency which incorporates a Cross Border Foreign Exchange Transaction reporting form. The sender hands the application form and commercial documents, such as a commercial invoice and transport document, to the bank. A spot rate of exchange (telegraphic selling rate), at which the amount will be converted, is obtained. The bank draft is prepared in accordance with the information furnished and handed to the applicant. The draft can then be posted to the beneficiary. Encashment Cashing a draft is a similar process to that of a cheque. The beneficiary deposits the draft with his bank and, once cleared, the funds are credited to the beneficiary s account. 2

4 Special considerations When paying by means of a draft, remember that: Delays will exist owing to the time taken for mailing and clearing of the draft. Drafts can be stolen and put to fraudulent use. Conclusion For further information on any of our products and services, please contact your nearest International Trade Services office, visit our website at (select Corporate and Investment, click on Banking/Finance solutions and go to International Trade Services), or call 0860iTrade/ Banks invariably charge more for handling drafts as a result of the additional workload, for example, verifying the authenticity of the instrument and checking for cover funds. Disclaimer: The Standard Bank of South Africa Limited ( SBSA ) has made every effort to ensure the accuracy and completeness of the information contained in this document. The information is not intended as advice and no warranty express or implied is made as to the accuracy, correctness or completeness of the information, which is subject to change at any time after publication without notice. Should the information lead you to consider entering into any transaction in relation to a financial product ( the product ) you must take note of the following: There are intrinsic risks involved in transacting in any products. No guarantee is provided for the investment value in a product. Any forecasts based on hypothetical data are not guaranteed and are for illustrative purposes only. Returns may vary as a result of their dependence on the performance of underlying assets and other variable market factors. Past performances are not necessarily indicative of future performances. Unless a financial needs analysis has been conducted to assess the appropriateness of the product, investment or structure to your unique particular circumstances, SBSA cautions you that there may be limitations on the appropriateness of the information for your purposes and you should take particular care to consider the implications of entering into the transaction, either on your own or with the assistance of an investment professional. There may be various tax implications to consider when investing in the product and you must be aware of these implications before investing. SBSA does not accept liability for the tax treatment by any court or by any authorities in any jurisdiction in relation to any transaction based on the information. It is strongly recommended that individual tax advice be sought before entering into any such transaction. Authorised financial services provider The Standard Bank of South Africa Limited (Reg. No. 1962/000738/06). SBSA /06 3

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