title: "Common Errors in Understanding MT 720: Transfer of a Documentary Credit"
date: 2026-07-15
batch: 29
topic_family: swift
status: approved

Common Errors in Understanding MT 720: Transfer of a Documentary Credit

Introduction

The MT 720 (Transfer of a Documentary Credit) is one of the more complex messages in SWIFT's Category 7 repertoire. It is used when a transferable credit under UCP 600 is transferred from the first beneficiary to a second beneficiary, and its structure and content requirements are frequently misunderstood. Errors in MT 720 construction and interpretation lead to disputes, processing delays, and sometimes outright transaction failures.

Understanding the MT 720 requires knowledge of both SWIFT's message specifications and UCP 600's Article 38 (Transferable Credits). The intersection of these two frameworks creates a set of requirements that are more nuanced than those for simpler message types like the MT 700 or MT 707.

Failure Modes

Failure Mode 1: Incorrectly Identifying the Beneficiary

The MT 720's Field 50 identifies the second beneficiary (the party receiving the transferred credit). Some operators incorrectly populate this field with the first beneficiary's details or with the applicant's details, creating confusion about who is entitled to present documents.

Failure Mode 2: Not Adjusting Credit Amount and Validity

When a credit is transferred, the amount and expiry date may need adjustment (for example, if the transfer is for a partial amount). The MT 720 should reflect these adjustments in Fields 32B and 31D, but operators sometimes carry over the original values without modification.

Failure Mode 3: Inconsistent Terms Between Original and Transferred Credit

UCP 600 Article 38(e) states that if the credit is transferred to more than one second beneficiary, the terms must be consistent. The MT 720 should reflect terms that are consistent with the original credit, but some operators modify terms in ways that create inconsistencies.

Failure Mode 4: Failure to Include Transfer Instructions

The MT 720 should include instructions for the second beneficiary's bank regarding examination, negotiation, and reimbursement. When these instructions are missing or unclear, the second beneficiary's bank may not know how to process the transferred credit.

Failure Mode 5: Missing or Incorrect Field 59

Field 59 (Beneficiary) in the MT 720 may be used to identify the original first beneficiary, particularly when the transfer involves a substitution of invoices. Incorrectly populating or omitting this field creates ambiguity about the parties' roles.

Resolution Strategies

Resolution 1: Reference the Original MT 700

When constructing an MT 720, operators should reference the original MT 700 to ensure that all transferred terms are consistent. A systematic comparison of each field between the MT 700 and the MT 720 catches inconsistencies before the message is sent.

Resolution 2: Clear Identification of All Parties

The MT 720 should clearly identify the first beneficiary, the second beneficiary, and any intermediary parties. Field labels and content should leave no ambiguity about each party's role in the transaction.

Resolution 3: Amount and Validity Adjustment Verification

Before sending the MT 720, verify that the amount (Field 32B) and expiry date (Field 31D) correctly reflect the transfer terms. If the transfer is for a partial amount, the MT 720 should show the reduced amount and any adjusted expiry date.

Resolution 4: Standardized Transfer Instructions

Banks should develop standardized instructions for the second beneficiary's bank that are included in the MT 720's Field 47A or Field 79 (Narrative). These instructions should cover document examination, negotiation procedures, and reimbursement arrangements.

Resolution 5: Training on MT 720 Specifics

Staff who process transferable credits should receive specific training on MT 720 construction and interpretation. This training should be separate from general MT message training, given the MT 720's unique requirements.

Resolution 6: Pre-Transfer Compliance Check

Before transferring a credit, the transferring bank should verify that the transfer complies with Article 38 — including confirming that the credit is expressly transferable and that the transfer terms are consistent with the original credit.

Resolution 7: Inter-Bank Communication Protocols

When disputes arise about the MT 720's content, banks should follow standardized communication protocols that reference the specific UCP 600 Article 38 provision and MT 720 field in question.

Conclusion

The MT 720 is a message that demands precision and a thorough understanding of both SWIFT specifications and UCP 600 Article 38. Errors in party identification, amount adjustment, term consistency, and instruction completeness are common but avoidable. Banks that invest in specialized training, develop standardized procedures, and implement systematic verification processes can process MT 720 messages accurately and efficiently.

Frequently Asked Questions

Q1: Who sends the MT 720?

The transferring bank sends the MT 720 to the second beneficiary's bank (the advising or nominated bank for the transferred credit). The transferring bank is typically the advising bank or a bank acting on the first beneficiary's instruction.

Q2: Can a credit be transferred more than once?

UCP 600 Article 38 does not explicitly prohibit back-to-back transfers, but it states that the credit cannot be transferred at the request of a second beneficiary to a third party. In practice, double transfers are rare and require careful coordination.

Q3: What happens if the MT 720 and original MT 700 are inconsistent?

Inconsistencies between the MT 720 and the original MT 700 create disputes about which terms govern the transaction. The second beneficiary's bank should contact the transferring bank to clarify any inconsistencies before processing.

Q4: Does the MT 720 replace the MT 700?

No. The MT 720 is a separate message that transfers the credit to the second beneficiary. The original MT 700 remains the governing document for the credit as issued; the MT 720 establishes the terms of the transferred credit.

Q5: Can the transferring bank change terms when preparing the MT 720?

The transferring bank can make changes that are consistent with the original credit, such as reducing the amount, shortening the expiry date, or reducing the percentage tolerance. Changes that add new conditions or conflict with the original credit are not permitted under Article 38.

Source Notes

Context only: This guide references SWIFT's Category 7 Message Reference Guide (specifically MT 720 specifications), UCP 600 Article 38 (Transferable Credits), and ISBP 745 guidance on transferable credits. All regulatory references are drawn from publicly available SWIFT and ICC publications. Source URLs and titles are catalogued in the provenance batch metadata for this guide (batch 29).