IBAN, SWIFT/BIC and beneficiary details: how to get them right

An error in the beneficiary’s details is the most frustrating reason for a returned payment. The goods are ready, the money has been debited, and the payment comes back because of a single letter. Let’s look at the two main details, IBAN and SWIFT/BIC, and the full set of data without which the beneficiary’s bank will not credit the payment.

What an IBAN is

IBAN (International Bank Account Number): an international bank account number under the ISO 13616 standard. It points to a specific account at a specific bank. It is not a card number and not a bank code.

An IBAN has the same structure in every country:

• two letters: the country code;
• two digits: the check digits;
• the national account number, which usually includes the bank code.

The length is fixed for each country, with a maximum of 34 characters. In the UAE an IBAN has 23 characters and starts with AE. In Turkey it has 26 characters and starts with TR. In Germany it has 22 characters and starts with DE. If the length does not match the country standard, the number contains an error.

How to check an IBAN

The check digits are calculated with a division-by-97 algorithm. Any online IBAN validator will check the length, the country code and the check digits in a second. This check catches typos: swapped digits, a missing character, the letter O instead of a zero.

But the check has a limit. A valid IBAN may belong to a different company. The check digits confirm that the number is correctly formed, not whose account it is. That is why the IBAN is always checked against the contract and the beneficiary’s name.

Where there is no IBAN

IBAN is used by countries in Europe and the Middle East and by some countries in Africa and Asia. But not by all of them.

• China. No IBAN. You need the account number, the bank’s name and address, and the SWIFT code. For payments in yuan, banks sometimes ask for a CNAPS code: the national code of the bank branch.
• Hong Kong. No IBAN. The account number includes the bank and branch codes.
• India. No IBAN. Besides the account number and the SWIFT code, the IFSC branch code is often required.
• The USA. No IBAN. The account number and the ABA routing number are used.

Russian accounts have no IBAN either. They use a 20-digit account number and a nine-digit BIK, the Russian bank identification code.

SWIFT/BIC

The SWIFT code, also known as BIC, identifies a bank, not an account. The format is set by the ISO 9362 standard. The code has 8 or 11 characters:

• four letters: the bank code;
• two letters: the country code;
• two characters: the location code;
• three characters: the branch code, an optional part.

An 8-character code refers to the bank’s head office. Sometimes XXX is added to make 11 characters; the meaning is the same. The Russian BIK and the international BIC are different codes, and they are confused more often than you might think. More on the ISO 9362 code format: SWIFT/BIC code.

The full set of beneficiary details

For a payment abroad you need:

• Beneficiary name: the beneficiary’s name exactly as the bank holds it, without abbreviations;
• Beneficiary address: the beneficiary’s address;
• Account number or IBAN: the account number;
• Bank name and bank address: the name and address of the beneficiary’s bank;
• SWIFT/BIC of the beneficiary’s bank;
• Intermediary bank: the intermediary bank and its SWIFT code, if the supplier specifies them;
• account currency: if it differs from the payment currency, the beneficiary’s bank will convert the funds itself at its own rate;
• payment purpose: the contract number and date, the invoice number and what is being paid for.

The payment purpose is written in Latin characters. Cyrillic is not transmitted in an international payment message, and the field length is limited. So it is better to agree the wording in advance and keep it short.

For dollars and euros, the payment usually goes through a correspondent account at an intermediary bank. For yuan, the route may go through China’s CIPS system. Which banks end up on the way depends on the route, and the fees depend on that.

All of these details must match in the contract, the invoice and the payment order to the agent. How to fill in an invoice is covered in the article “How to fill in an invoice so the payment goes through”.

Common mistakes

1. The SWIFT code of the intermediary bank is given instead of the beneficiary’s bank.
2. The beneficiary’s name is abbreviated or translated. The bank checks it against the account holder literally.
3. Extra spaces and characters after copying from a PDF. The letters O and I instead of the digits 0 and 1.
4. The account is in one currency and the payment in another. The money will arrive, but the supplier will receive less because of the conversion at its bank.
5. The details arrived by email and do not match the contract. Such changes are confirmed by a call to a known number and by a supplementary agreement: this is a common fraud scheme.
6. The beneficiary in the details is not the one in the contract. A payment to a third party requires a document that explains it.

If the payment comes back, the banks along the way will keep their fees, and the reverse conversion will be done at a different rate. Checking the details before sending costs less.

VEDmost checks the beneficiary’s details against the contract and invoice before the payment order is issued. We select the agent for the beneficiary’s country and bank, and fix the rate and fee in the payment order before the roubles are debited. More on the “Invoice payments” and “Paying for goods and services abroad” pages.