Understanding how multi-bank LCs are built, transmitted, and synchronized for flawless compliance.

✅ Executive Summary

In the complex ecosystem of international trade, Letters of Credit (LCs) are often issued across multiple banks, branches, or jurisdictions — requiring precise coordination between MT700 (primary issuance) and MT705 (advice through another bank).

These messages define not only who pays whom, but under what exact documentary and operational conditions.
Any inconsistency between MT700 and MT705 — even a single word — can lead to delayed payments, rejections, or cross-border disputes under UCP 600.

“Two LCs can share the same value and parties — yet collapse under different wording.”

✅ 1. Understanding MT700 and MT705: Core Distinctions

The MT705 message does not replace the MT700 — it extends it, allowing the LC to travel through correspondent networks when the issuing bank has no direct RMA relationship with the final advising or beneficiary bank.

✅ 2. When to Use MT705: Typical Scenarios

1. Multi-Bank Chains

   • When the issuing bank cannot communicate directly with the beneficiary’s bank.

   • Example: Issuer in Africa → Intermediary in London (MT705) → Beneficiary bank in Singapore.

2. Syndicated or Back-to-Back LCs

   • When one LC backs another; e.g., a supplier LC issued based on a master LC.

   • Each linked LC must be transmitted separately (MT700/705 chain).

3. Confirmed LCs via Secondary Advising Banks

   • When a confirmation is added by a second-tier bank in another jurisdiction.

4. Jurisdictional or Currency Control Reasons

   • Some central banks require domestic confirmation or re-advising (MT705).

Each MT705 adds one more layer of legal distance — and therefore, one more potential point of discrepancy.

✅ 3. Structure of MT700: Key Fields (Simplified)

Any inconsistency between MT700 and MT705 in fields like 45A, 46A, or 47A can void the credit’s integrity.

✅ 4. Structure of MT705: How It Mirrors (and Differs)

MT705 communicates the content of an existing LC — but allows certain non-material local adaptations.

🔹 Core Fields in MT705

Allowed Modifications (by advising bank):

• Translation of field text (without altering content).

• Clarification of codes or abbreviations.

• Addition of local compliance instructions (e.g., “subject to FX regulations”).

Prohibited Modifications:

• Changing amount, expiry date, or goods description.

• Altering rules (UCP 600 → ISP98).

• Changing charges from OUR to BEN or vice versa.

The advising bank communicates, but never modifies — unless it becomes a confirming bank, in which case it assumes liability.

✅ 5. Linked LCs: Structuring and Synchronization

Linked or back-to-back LCs involve a master LC (buyer → intermediary) and a secondary LC (intermediary → supplier).
These are commonly transmitted via MT700 (master) and MT705 (secondary advice).

Synchronization Checklist:

• Amounts and shipment windows aligned.

• Goods description identical or narrower.

• Expiry date of secondary LC earlier than master LC.

• All document sets compatible with both credits (esp. B/L and invoices).

• Rule consistency (both under UCP 600 unless otherwise stated).

⚠️ Common risk: “documentary mismatch” between LC1 and LC2 — one document compliant with one LC but not the other.

✅ 6. Typical Divergences and Their Impacts

✅ 7. Risk Mitigation: Building “Divergence-Proof” LCs

🧩 Pre-Issuance Protocol

• Verify RMA connections between all banks.

• Use draft verification of MT700 and MT705 simultaneously.

• Cross-check all numeric and descriptive fields (32B, 44E, 45A, 46A).

• Validate ICC rule (UCP 600) on both messages.

• Agree in writing on 71B (charges) and governing law.

🧩 During Transmission

• Use ISO 20022 trade message syntax for validation.

• Leverage SWIFT GPI tracking for audit trail.

• Activate dual authorization (4-eye control) for message emission.

🧩 Post-Issuance Monitoring

• Monitor document presentation deadlines and shipment dates.

• Perform real-time doc checks (AI document validators like Traydstream).

• Keep identical copies of MT700/705 verbiage in shared vaults.

Automation is reducing LC discrepancies by over 70% in 2025, according to ICC & SWIFT trade digitization benchmarks.

✅ 8. Example: Dual-Bank LC Chain (Simplified Flow)

1. Applicant’s Bank (Issuing) sends MT700 to Correspondent Bank (Advising).

2. Advising Bank forwards via MT705 to Beneficiary’s Bank.

3. Beneficiary’s Bank advises client, collects documents, and sends back compliant presentation.

4. Documents flow upward, payments flow downward, across SWIFT and courier lines.

Key to success:
All message references (Field 20, Field 21, Field 31C/D) must match at every level.

✅ 9. Compliance and Audit Considerations

• Rule Reference: Always cite UCP 600 (Articles 5, 7, 14–30).

• KYC/AML: Mandatory for all parties in multi-bank chains (especially in back-to-back or revolving LCs).

• Sanctions Screening: Apply to all counterparties and vessels at each advising stage.

• Retention Policy: Store MT700/705 messages and document sets for at least 7–10 years.

• Internal Controls: Independent “LC Operations Desk” separate from front-office.

✅ 10. Conclusion

The MT700–MT705 dual structure allows global trade to function across multiple correspondent networks — but it also multiplies risk when not synchronized.
Every successful LC transaction depends on documentary precision, message alignment, and rule consistency between banks.

In Trade Finance, the best deals aren’t the biggest — they’re the most compliant.

A single missing line in MT705 can turn a $50M contract into a compliance dispute.
Hence, digital verification, standardized templates, and SWIFT-integrated validation systems are now the minimum standard for professional LC structuring.

Structure before speed. Compliance before cash.
That’s how MT700/705 LCs sustain trust — one field at a time.