The following article is the first of a series of 10 articles on cross border transactions and remittances. These articles will explore the rules and regulations that monitor these transactions, the requirements Malaysian individuals or companies must fulfill when undertaking such payments via banks. They will also look into how sufficient the existing systems are in ensuring transparency in cross border remittances and the role banks and financial institutions play in the traceabillity of the funds, and their obligations to their clients in the event of returned remittances.
Today’s article examines the MT103 Swift message and its role in cross border remittances. Weekly Echo speaks to Raymon Ram, Managing Principal of Graymatter Forensic Advisory Sdn Bhd.
The MT103 and its importance in cross border remittances
The MT103, which is a disclosure message under the Swift ( Society for Worldwide Interbank Financial Telecommunications), is a requirement when an international wire transfer is made via a bank or financial institution. Under this requirement, the transfer of funds across the border or into a foreign bank account has to be accompanied by details of the remitter, recipient, transaction amount, currency, value date, and bank details.
Q. How effective is the MT103 Swift message in ensuring transparency in international funds transfer?
The SWIFT MT103 message provides a globally standardized format that records key details of international transfers, including the sender (ordering customer), beneficiary, banks involved, and the purpose of payment.
For Malaysian banks, compliance with FATF Recommendation 16 ensures that this information supports robust transparency and traceability under Bank Negara Malaysia (BNM) oversight. However, while the MT103 system enables full data capture, it does not inherently reveal whether the payer is the contracting entity or a legitimate intermediary paying on its behalf.
In sectors like shipping, it is common for payments to be made by third-party entities, such as agents, related companies, or financing intermediaries, while the contractual obligation remains with a different party. As long as these arrangements are transparent, properly documented, and declared, they fit within the MT103 framework. But when banks or corporates fail to disclose or verify the legitimacy of such third-party payers, transparency can break down, exposing both institutions and clients to regulatory and reputational risks.
Thus, while MT103 is highly effective in documenting transactions, its real transparency value depends on the quality and completeness of the underlying disclosures by both banks and corporate clients.
Q. What are the failure points in the use of MT103 Swift messages, if any, in ensuring transparency and traceability of international funds?
Failure points arise when key fields, such as the identity of the true fund owner, the payer-beneficiary relationship, or the purpose of payment, are incomplete, vague, or misrepresented. In cases where payments are made by third parties (for example, intermediaries or agents paying on behalf of a shipping firm), failing to document and declare this relationship accurately can obscure the true origin of funds and compromise traceability. Banks may inadvertently become victims when sophisticated fraudsters exploit these gaps, but they can also be complacent or negligent if they fail to apply enhanced due diligence when third-party payers are involved.
Q. Any recommendations for better disclosure improvements?
To strengthen disclosure, Malaysian banks should fully leverage SWIFT gpi for end-to-end transaction tracking, transition to ISO 20022 richer data standards, and strictly adhere to Wolfsberg Group payment transparency principles. Regulators should enforce uniform requirements for documenting third-party payment arrangements, ensuring that MT103 messages clearly reflect both the ordering customer and the ultimate obligor under the contract.
Corporates, including shipping agents and firms, must proactively provide complete, truthful documentation, including Letters of Undertaking (LOUs) and supporting contracts, to avoid delays, suspicions, or regulatory breaches.
–WE