Understanding Charge Codes in SWIFT Payments: OUR/DEBT, BEN/CRED, and SHA/SHAR

Introduction

When making international payments via the SWIFT network, one crucial aspect that determines how charges are handled is the charge code used in the transaction. The charge code defines how payment-related fees are distributed between the sender and the beneficiary. The three commonly used charge codes in SWIFT payments are OUR, BEN, and SHA. In this article, we’ll explore what these codes mean, how they impact charges (including intermediary charges), how they are represented in SWIFT messages, and how they compare with ISO 20022 charge codes DEBT, CRED, and SHAR.

What Are SWIFT Payment Charge Codes?

When funds are transferred internationally via the SWIFT network, various banks are involved in the process: the sender’s bank, intermediary banks, and the beneficiary’s bank. Each of these banks may deduct fees for processing the payment. The charge code determines who—the sender or the beneficiary—will bear these fees.

The Three Charge Codes

1. OUR (All Charges Paid by Sender):
   • The sender pays all charges, including fees levied by intermediary and beneficiary banks.
   • The Intermediary Banks and the Beneficiary Bank will send the MTn91 or CAMT106 to Sender bank requesting the charges.
   • The beneficiary receives the full instructed amount.
2. BEN (All Charges Paid by Beneficiary):
   • The beneficiary pays all charges, including fees levied by the sender’s bank, intermediary banks, and the beneficiary’s bank.
   • Deductions are made from the instructed amount, and the beneficiary receives the instructed amount minus all the accumulated charges.
3. SHA (Shared Charges):
   • The charges are shared between the sender and the beneficiary.
   • The sender pays the charges of their bank. This amount (Sender Bank’s Charges) is generally not reflected in the Instructed Amount.
   • The beneficiary pays the charges of intermediary and beneficiary banks.
   • The beneficiary receives the instructed amount minus the charges levied by intermediary and beneficiary banks.

Representation of Charges in SWIFT Messages

Charges in SWIFT payments are communicated using specific fields in SWIFT MT messages:

Key Fields

1. Field 71A: Details of Charges
   • Indicates the charge code (OUR, BEN, SHA).
   • Example: ‘:71A:SHA’
2. Field 71F: Sender’s Charges
   • Specifies the amount of charges paid by the sender.
   • Example: ‘:71F:USD20,05’
3. Field 71G: Receiver’s Charges
   • Specifies charges deducted by intermediary or beneficiary banks.
   • Example: ‘:71G:EUR28,50’

SWIFT Network Validations on 71F and 71G Fields

Charge Code (71A)	71F (Sender’s Charges)	71G (Receiver’s Charges
OUR	Not Allowed	Optional
SHA	Optional	Not Allowed
BEN	Mandatory (at least one occurrence)	Not Allowed

Comparison with ISO 20022 Charge Codes

ISO 20022 messages use different charge codes but follow a similar principle. The main charge codes in ISO 20022 are:

1. DEBT (Debtor Pays All Charges):
   • Equivalent to SWIFT’s OUR.
   • The sender (debtor) pays all charges, and the beneficiary receives the full amount.
2. CRED (Creditor Pays All Charges):
   • Equivalent to SWIFT’s BEN.
   • The beneficiary (creditor) pays all charges, and deductions are made from the instructed amount.
3. SHAR (Shared Charges):
   • Equivalent to SWIFT’s SHA.
   • The sender pays their bank’s charges, and the beneficiary pays intermediary and beneficiary bank charges.

Key Differences:

• ISO 20022 messages provide more granular details of charges through structured fields.
• Charges are explicitly categorized as debtor and creditor charges, reducing ambiguity.
• Intermediary fees are often more transparent in ISO 20022 formats compared to SWIFT MT messages.

SWIFT MT vs ISO 20022 Charge Representation

Aspect	SWIFT MT (OUR, BEN, SHA)	ISO 20022 XML (DEBT, CRED, SHAR)
Charge Type	71A: OUR, BEN, SHA	<ChrgBr>: DEBT, CRED, SHAR
Sender’s Charges	71F: Sender’s Bank Fee	<ChrgsInf><Amt> with <Agt> (Sender’s Bank)
Receiver’s Charges	71G: Receiver’s Bank Fee	<ChrgsInf><Amt> with <Agt> (Receiver’s Bank)
Message Structure	Fixed fields (71A, 71F, 71G)	Structured XML (Hierarchical <ChrgsInf>)
Charge Breakdown	Basic (less structured)	Detailed and structured
Settlement Amount	Calculated implicitly	Explicitly provided

Intermediary Charges in a Payment – Brief Overview

Intermediary charges are fees deducted by banks that process a payment before it reaches the final beneficiary. These charges occur in cross-border SWIFT payments when the sender and beneficiary banks do not have a direct relationship, requiring correspondent banks (intermediaries) to facilitate the transfer.

Key Points About Intermediary Charges:

1. Not explicitly mentioned in MT103 messages – They are deducted off-message during processing.
2. Applied based on the charge code (OUR, SHA, BEN):
3. OUR – Sender covers all charges, and intermediaries deduct fees from the sender’s separate account.
4. SHA – Sender pays its own bank fee, but intermediary banks deduct their charges from the payment amount.
5. BEN – The beneficiary pays all charges, meaning intermediaries deduct their fees before forwarding the payment.
6. Not always predictable – The sender may not know exact intermediary fees unless pre-agreed.
7. Represented in ISO 20022 messages (pacs.008) using <ChrgsInf> but practically not shown in SWIFT MT103.

How Charge Codes Work in Practice (Including Intermediary Charges)

To understand the practical implications of charge codes, let’s look at an example:

Scenario 1:

1. Instructed Amount: USD 1,000.
2. Bank A (Sender Bank) – Sender Bank Charges: USD 20
3. Bank B (Intermediary Bank 1) – Intermediary Bank 1 Charges: USD 15
4. Bank C (Intermediary Bank 2) – Intermediary Bank 2 Charges: USD 10.
5. Bank D (Receiver Bank) – Beneficiary Bank Charges: USD 5.
6. Customer A (Sender) – Sender’s Account Currency: USD.
7. Customer D (Receiver) – Receiver’s Account Currency: USD.

Payment Legs:

There are 4 Banks involved and let us see how the charges and interbank settlement amount are calculated and represented in the payment message at each bank.       

OUR Charge Code (Sender Pays All Charges):

• The sender pays all the charges (Sender Bank + Intermediary Bank 1 + Intermediary Bank 2 + Beneficiary Bank).
• The beneficiary receives the full instructed amount (USD 1,000) with no deductions.

NOTE: We will not include Pre-Payment of Charges by Sender concept here and focus on Core Concept. Please do comment below if you want to understand on Pre Payment-Charges and How they are used in calculating the charges.

Simply Put, please comment below if you want to understand How and When 71G is used.

Bank A Processing: Sender Bank

1. Charges Calculation:
   • Sum of all Charges => 20 USD (Bank A) + 15 USD (Bank B) + 10 USD (Bank C) + 5 USD (Bank D) = 50USD
2. Charges are charged to the Sender’s Account and are debited separately.
3. Instructed Amount by Sender is 1000 USD and are debited from Sender’s Account.
4. Total Debit Amount from Sender Account = 1000 USD (Instructed Amount) + 50 USD (Cumulative Charges) = 1050 USD
5. Interbank Settlement Amount = 1000 USD
6. Instructed Amount = 1000 USD
7. Charges Mention in instruction to Bank B
   • MT
     • :71A:OUR
   • MX
     • <ChrgBr>DEBT</ChrgBr>

Bank B Processing: Intermediary Bank 1

1. Charges Calculation
   • Bank B receives the payment and sees the Charge Code as OUR.
   • It will raise a Charge Claim to the Sender bank A via separate message CAMT106 or MTn91.
2. Instructed Amount = 1000 USD
3. Interbank Settlement Amount = 1000 USD (No Deduction of Charges)
4. Bank B takes funds from Bank A and Transfers to Bank C.
5. Charges Mention in instruction to Bank C
   • MT
     • :71A:OUR
   • MX
     • <ChrgBr>DEBT</ChrgBr>

Bank C Processing: Intermediary Bank 2

1. Charges Calculation
   • Bank C receives the payment and sees the Charge Code as OUR.
   • It will raise a Charge Claim to the Immediate Sender bank B via separate message CAMT106 or MTn91. (This Claim will be either forwarded to Sender Bank A or Settled by Bank B if the Prepayment is done)
2. Instructed Amount = 1000 USD
3. Interbank Settlement Amount = 1000 USD (No Deduction of Charges)
4. Bank C takes funds from Bank B and Transfers to Bank D.
5. Charges Mention in instruction to Bank D
   • MT
     • :71A:OUR
   • MX
     • <ChrgBr>DEBT</ChrgBr>

Bank D Processing: Receiver Bank

1. Charges Calculation
   • Bank D receives the payment and sees the Charge Code as OUR.
   • It will raise a Charge Claim to the Immediate Sender bank C via separate message CAMT106 or MTn91. (This Claim will be either forwarded to Sender Bank A via Bank B or Settled by Bank C if the Prepayment is done)
2. Bank D takes funds from Bank C and Credits Customer D the full Instructed Amount 1000 USD.
3. Amount that Beneficiary receives = 1000 USD

BEN Charge Code (Beneficiary Pays All Charges):

• The beneficiary bears all the charges (Sender Bank + Intermediary Bank 1 + Intermediary Bank 2 + Beneficiary Bank).
• All charges are deducted from the instructed amount, and the beneficiary receives the net amount.

Bank A Processing: Sender Bank

1. Charges Calculation:
   • Sender Bank’s Charges = 20 USD (Bank A)
2. Charges are deducted from the Instructed Amount.
3. Instructed Amount by Sender is 1000 USD and are debited from Sender’s Account.
4. Total Debit Amount from Sender Account = 1000 USD (Instructed Amount) only.
5. Interbank Bank Settlement Amount => 1000 USD (Instructed Amount) – 20 USD (Bank’s Charges) = 980 USD
6. Instructed Amount = 1000 USD
7. Charges Mention in instruction to Bank B
   • MT
     • :71A:BEN
     • :71F:USD20,00
   • MX
     • <ChrgBr>CRED</ChrgBr>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>20.00</Amt>
       • <Agt><FinInstnId><BICFI>AAAAUS11XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>

Bank B Processing: Intermediary Bank 1

1. Charges Calculation:
   • Intermediary Bank 1’s Charges = 15 USD (Bank B)
2. Charges are deducted from the Payment proceeds, that is Interbank Settlement Amount.
3. 980 USD is the amount that Bank B gets from Bank A.
4. Interbank Bank Settlement Amount => 980 USD (Incoming Interbank Settlement Amount) – 15 USD (Bank’s Charges) = 965 USD
5. Instructed Amount = 1000 USD
6. Charges Mention in instruction to Bank C (71F is a repeatable field in the MT Message. But there is no mention of the agent. So mostly, Intermediary Bank Charges are not mentioned in MT Payment)
   • MT
     • :71A:BEN
     • :71F:USD20,00
   • MX
     • <ChrgBr>CRED</ChrgBr>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>20.00</Amt>
       • <Agt><FinInstnId><BICFI>AAAAUS11XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>15.00</Amt>
       • <Agt><FinInstnId><BICFI>BBBBUS22XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>

Bank C Processing: Intermediary Bank 2

1. Charges Calculation:
   • Intermediary Bank 2’s Charges = 10 USD (Bank C)
2. Charges are deducted from the Payment proceeds, that is Interbank Settlement Amount.
3. 965 USD is the amount that Bank C gets from Bank B.
4. Interbank Bank Settlement Amount => 965 USD (Incoming Interbank Settlement Amount) – 10 USD (Bank’s Charges) = 955 USD
5. Instructed Amount = 1000 USD
6. Charges Mention in instruction to Bank D (71F is a repeatable field in the MT Message. But there is no mention of the agent. So mostly, Intermediary Bank Charges are not mentioned in MT Payment)
   • MT
     • :71A:BEN
     • :71F:USD20,00
   • MX
     • <ChrgBr>CRED</ChrgBr>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>20.00</Amt>
       • <Agt><FinInstnId><BICFI>AAAAUS11XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>15.00</Amt>
       • <Agt><FinInstnId><BICFI>BBBBUS22XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>10.00</Amt>
       • <Agt><FinInstnId><BICFI>CCCCUS33XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>

Bank D Processing: Beneficiary Bank

1. Charges Calculation:
   • Beneficiary Bank’s Charges = 5 USD (Bank D)
2. Charges are deducted from the Payment proceeds, that is Interbank Settlement Amount.
3. 955 USD is the amount that Bank D gets from Bank C.
4. Amount that Receiver receives => 955 USD (Incoming Interbank Settlement Amount) – 5 USD (Bank’s Charges) = 950 USD.

SHA Charge Code (Shared Charges):

• The sender pays only the charges levied by the sender’s bank (USD 20).
• The beneficiary pays charges levied by intermediary banks and the beneficiary bank.

Bank A Processing: Sender Bank

1. Charges Calculation:
   • Sender Bank’s Charges = 20 USD (Bank A)
2. Charges are deducted from the Sender’s Account separately. (Usually, these charges are not shown in the payment message)
3. Instructed Amount by Sender is 1000 USD and are debited from Sender’s Account.
4. Total Debit Amount from Sender Account => 1000 USD (Instructed Amount) + 20 USD (Sender Bank Charges) = 1020 USD
5. Interbank Bank Settlement Amount = 1000 USD (Instructed Amount)
6. Instructed Amount = 1000 USD
7. Charges Mention in instruction to Bank B
   • MT
     • :71A:SHA
   • MX
     • <ChrgBr>SHAR</ChrgBr>

Bank B Processing: Intermediary Bank 1

1. Charges Calculation:
   • Intermediary Bank 1’s Charges = 15 USD (Bank B)
2. Charges are deducted from the Payment proceeds, that is Interbank Settlement Amount.
3. 1000 USD is the amount that Bank B gets from Bank A.
4. Interbank Bank Settlement Amount => 1000 USD (Incoming Interbank Settlement Amount) – 15 USD (Bank’s Charges) = 985 USD
5. Instructed Amount = 1000 USD
6. Charges Mention in instruction to Bank C (Intermediary Bank Charges are not mentioned in MT Payment)
   • MT
     • :71A:SHA
   • MX
     • <ChrgBr>SHAR</ChrgBr>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>15.00</Amt>
       • <Agt><FinInstnId><BICFI>BBBBUS22XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>

Bank C Processing: Intermediary Bank 2

1. Charges Calculation:
   • Intermediary Bank 2’s Charges = 10 USD (Bank C)
2. Charges are deducted from the Payment proceeds, that is Interbank Settlement Amount.
3. 985 USD is the amount that Bank C gets from Bank B.
4. Interbank Bank Settlement Amount => 985 USD (Incoming Interbank Settlement Amount) – 10 USD (Bank’s Charges) = 975 USD
5. Instructed Amount = 1000 USD
6. Charges Mention in instruction to Bank D (Intermediary Bank Charges are not mentioned in MT Payment)
   • MT
     • :71A:SHA
   • MX
     • <ChrgBr>SHAR</ChrgBr>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>15.00</Amt>
       • <Agt><FinInstnId><BICFI>BBBBUS22XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>
     • <ChrgsInf>
       • <Amt Ccy=”USD”>10.00</Amt>
       • <Agt><FinInstnId><BICFI>CCCCUS33XXX</BICFI></FinInstnId></Agt>
     • </ChrgsInf>

Bank D Processing: Beneficiary Bank

1. Charges Calculation:
   • Beneficiary Bank’s Charges = 5 USD (Bank D)
2. Charges are deducted from the Payment proceeds, that is Interbank Settlement Amount.
3. 975 USD is the amount that Bank D gets from Bank C.
4. Amount that Receiver receives => 975 USD (Incoming Interbank Settlement Amount) – 5 USD (Bank’s Charges) = 970 USD.

Summary:

Charge Code	Sender Pays (Charges)	Beneficiary Pays (Charges)	Beneficiary Receives (Final Credit)	Total Paid by Sender
OUR/DEBT	All charges (USD 50)	None	USD 1,000	USD 1,050
BEN/CRED	None	All charges (USD 50)	USD 950	USD 1,000
SHA/SHAR	Sender’s bank charges (USD 20)	Intermediary Bank (USD 25) + Receiver Bank (USD 5)	USD 970	USD 1,020

Practical Observations

1. OUR:
   • The sender bears a higher cost to ensure the beneficiary receives the full amount.
   • Ideal for business transactions requiring exact payment to the beneficiary.
2. BEN:
   • The beneficiary receives the least amount as all charges are deducted from the transfer.
   • Common for informal transfers where the sender does not want to cover charges.
3. SHA:
   • A balanced approach where charges are split between sender and beneficiary.
   • Common for shared responsibility in payment processes.

Scenario 2:

1. Instructed Amount: EUR 1,000.
2. Sender Bank Charges: USD 20 (converted to EUR = 18 at an exchange rate of 1 USD = 0.90 EUR).
3. Intermediary Bank 1 Charges: USD 15 (converted to EUR = 13.50).
4. Intermediary Bank 2 Charges: EUR 15.
5. Beneficiary Bank Charges: EUR 10.
6. Sender’s Account Currency: USD.
7. Receiver’s Account Currency: EUR.
8. Exchange Rate: 1 USD = 0.90 EUR.

Please do comment below if you want explanation of the above scenario where there is currency conversion from USD to EUR.

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Key Considerations When Using Charge Codes

1. Regulatory Requirements:
   • Some jurisdictions mandate specific charge codes (e.g., OUR/DEBT for certain corporate or government payments).
2. Transparency:
   • Clearly communicate charge arrangements to both the sender and the beneficiary to avoid disputes.
3. Exchange Rate Impact:
   • Charges converted between currencies can lead to discrepancies in the final settlement amount.
4. Intermediary Banks:
   • Each intermediary bank may deduct additional fees, particularly with BEN/CRED or SHA/SHAR codes.

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Conclusion

Understanding SWIFT charge codes (OUR, BEN, SHA) and their ISO 20022 equivalents (DEBT, CRED, SHAR) is essential for ensuring smooth international payments and managing expectations regarding charges. By choosing the appropriate charge code, businesses and individuals can control who bears the cost of the transaction and ensure compliance with payment agreements. Always verify charges with your bank and include them in your cost planning for international payments.