Getting paid in full when someone sends you a bank wire

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.

12 thoughts on “Getting paid in full when someone sends you a bank wire

  1. We have used the OUR method successfully with all non-US counsel until recently…Now one of our foreign counsel who always sent us a check drawn on bank with offices in the the US has now moved to electronic payment…and the first payment was $20 short. Not acceptable to us….We explained the OUR payment method and they came back with their system called for what is basically SHA. We let them know that this is not acceptable to us. So they have agreed that we can add $20 to any invoice sent to them as an expense item. We’ll see how it works…

    • Yes many years ago we tried to do this with some foreign agent. This particular foreign agent seemed to use a different bank every second or third time to pay us, and so the “SHA” shortage was different from one time to the next. Plus sometimes they would arrange for one particular client of theirs to pay one invoice, and then they would arrange for a different particular client of theirs to pay another invoice. Each client would be using a different bank, each of which used still a different intermediate bank. So the “SHA” shortage would be non-identical from one invoice payment to the next, even for the same foreign agent.

      Nowadays I think the thing to do is beat up the foreign agent to use some payment mechanism that gouges us less (and probably gouges the foreign agent less too). I sort of can’t think why anybody would do other than using TransferWise or Afex instead of whatever they were using before. The thing is we all have an obligation to spend our clients’ money wisely. A wire transfer service provider that uses an unfavorable exchange rate, that charges higher fees … that is a wire transfer service provider that we should not be saddling our clients with.

      Besides, every time some foreign client or foreign associate switches to TransferWise or Afex, the result is that suddenly we can send money to each other with no fees at all which I really really like.

  2. Carole – The problem with adding a reverse haircut to your invoice is that you still have to account for the haircut. For example, you now have to remember for cases for this one particular foreign law firm that when you get paid X-$20, you are supposed to write off the $20 instead of carrying that as an outstanding receivable. This kind of arrangement only works in very small law firms.

    • What he said. And if you start billing in advance for SHA haircuts, it means you have to have a crystal ball good enough to predict the amount of the haircut. Over the years every time we tried to do this, invariably this would eventually end up being more trouble than it was worth. The foreign firm would for example sometimes pass a first invoice to a first one of their clients asking the client to pay us directly. That client would of course use a different bank which would have a different level of gouging. The foreign firm would then pass a second invoice to a second one of their clients asking that client to pay us directly. That client would of course use a third bank which would have a still different level of gouging.

      So instead of a predictable $20 haircut each time, it would be $45 here, $15 there. No consistency to it. And every time our billed-in-advance haircut turned out not to match the actual SHA haircut, it would then require two or three emails back and forth until everyone had agreed with everyone else how this would be trued up. This round of emails of course has its own internal cost to the firm.

      Oh and if you rub your crystal ball and if you predict that the SHA haircut will be (say) $20 so you tack that on to each invoice in advance. Then what if the foreign firm sends a single wire to pay three invoices? You have now billed $60 in advance for only $20 worth of haircuts. So now yet another round of emails has to be sent back and forth until everyone has reached closure on how this will be trued up.

    • Wow that is even worse, seems to me. At least with our bank, we are not permitted to deposit foreign checks by phone. The only choice is to take it to a branch. Plus the check can get lost in the mail etc.

      • How much does your bank charge you for depositing (domestic) checks by phone? Have you done a fee comparison for various banks?

        • Until a few months ago our relationship with Wells Fargo was that our accounts were “analyzed”. This meant that we got gouged for each deposited check. Finally we switched over to an ordinary type of monthly fee. And now if we deposit a domestic check by phone it can be one of our 200 or so “free” transactions per month.

          • Just to make sure I understand your office’s practice, one or more of your staff have the Wells Fargo app installed on their phone for your business account, and they take photos of each check using the app and deposit them that way? (As opposed to you paying a fee each month for a check scanner.)

          • Unfortunately Wells Fargo puts limits on how many dollars a particular check can be that we deposit by phone. And they put a cap on how many dollars we can deposit in total per month. Just today we received a single check from a client that was large enough that we literally could not deposit by phone because it exceeded the per-check limit. So I had to send one of our employees to the ATM to physically deliver the check to the ATM. We have what are called “deposit cards”. The employee can go to the ATM and deposit checks but the card cannot be used for any other function.

            But yes when we can we do deposit checks using the phone app. I usually do the deposit myself personally with my own phone.

  3. “How much does your bank charge you for depositing (domestic) checks by phone?” – BOA charges us USD 10 per month for that privilege. And another USD 10 per month for business banking. Phone deposit limit is high enough it is not a concern. RICK

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