Our firm receives many incoming international bank wires every month. These wires come from patent and trademark firms outside the US and they come from corporate clients outside the US. In most cases, the amount of money that we receive matches the amount of money the sender says they sent. But often enough to be annoying, we will receive a wire that is “short”. Sometimes the shortage is $15, sometimes $40, sometimes another amount. Is there a way to eliminate the shortages? This blog article describes something you can do to try to reduce or eliminate the shortages.
The first thing I will acknowledge is that by far the majority of our foreign colleagues somehow manage to pay their invoices in full. I guess this spoils us and makes it all the more noticeable (indeed, irritating) when a particular foreign colleague sends a “short” bank wire. The sender is paying a $1000 invoice, and we only receive (say) $975. In such a case, we post the $975 amount to the invoice. This leaves a $25 balance still owed. We then send a statement of account to the foreign colleague showing $25 outstanding.
All too often, what happens next is the sender tries to tell us that they really paid the invoice in full, and that if there was any shortage it was because of our bank charging a fee. We know this to be false because our service providers (TransferWise and AFEX) do not charge for incoming bank wires. Things then go back and forth. Sometimes the sender is very stubborn and refuses to acknowledge that $25 is still outstanding.
The point of this article is to suggest what you may wish to communicate to your foreign colleagues to reduce how often you get shorted.
By way of background, if you are located in the US there are many ways that someone outside of the US might send you money. Most of these ways are not likely to get shorted. I will mention some of the ways.
Intra-provider transfer. If the sender and recipient are both users of the same service provider, for example AFEX or TransferWise, then it often works out that the transfer is instant and free of any fees. Several clients of our firm have signed up for TransferWise. They find that it saves them money on fees, they find that it gives them better currency exchange rates, and they find that it offers free-of-charge transfers to other TransferWise users such as our firm.
ACH. A firm or corporation located outside the US might have a wire transfer service provider that uses some bank within the US to send an ACH transfer to your US bank. This approach often takes a couple of days for the ACH transfer to finish. This approach usually does not generate a shortage. This approach usually does not give rise to a bank fee at the recipient’s bank.
ABA bank wire. A firm or corporation located outside the US might have a wire transfer service provider that uses some bank within the US to send an ABA wire (domestic wire) to your US bank. This approach is usually very fast (same day). This approach usually does not generate a shortage. Your bank might charge a fee for receiving the bank wire.
IBAN wires. You may be in a country where banks use IBAN. The sender may also be in such a country, in which case they will probably use an IBAN wire. If so, your incoming wire will probably be fast and will probably not be shorted. Probably you will not have to pay a fee to receive the IBAN wire. The sender will likely pay a smaller bank fee than if SWIFT were employed.
SWIFT wire. Most firms and corporations locating outside the US use what are called “SWIFT” wires to send payments to banks in the US. (The SWIFT logo appears above.) Every time our firm has ever been shorted, the wire was a SWIFT wire. And this gets us to the main point of this blog article. In the SWIFT system, the sender (or the sender’s service provider) fills out a SWIFT form according to a standard called MT103. The MT103 standard defines various numbered fields, one of which is field number 71A. Field number 71A determines who pays the wire transfer bank fees. The sender can pick any of three choices:
- OUR – The sender pays all of the bank fees, and the recipient receives the full amount of the transfer.
- SHA – The sender pays the sender’s own bank fee, but any intemediary bank fees get charged to the recipent.
- BEN – The sender pays no bank fees. All bank fees are charged to the recipient.
From this discussion the alert reader will already know where this article is going. If you are a recipient, the smart thing is to advise the sender to please pick “OUR” in SWIFT field 71A. The sender should be told not to use “SHA” or “BEN” for the bank fees.
Here is language that we recently added to the wire transfer instructions that we provide to our foreign colleagues:
The sender of a SWIFT wire completes field 71A with one of three choices:
- OUR means the sender pays all transfer charges. OPLF receives the sender’s payment without any shortage.
- SHA (shared) means the sender pays only the sender’s bank’s outgoing transfer charge. OPLF receives the payment minus the charges of one or more correspondent (intermediary) banks.
- BEN (beneficiary) means the sender does not pay any charge. OPLF receives the payment minus all transfer charges.
OPLF requires that all international transfers to OPLF be made with the OUR (sender pays) instruction.
Do you get shorted when a foreign colleague sends you a bank wire? Please post a comment below.