Commodity and financing deals often come with a list of bank documents that one side demands from the other: a proof of funds letter, an MT103 copy, an MT760 or MT799 message, a standby letter of credit (SBLC) or a comfort letter. Clients sometimes expect their paymaster to provide these. A law firm acting as paymaster does not, and understanding why helps you avoid costly mistakes.
What these documents are
- Proof of funds (POF): a letter or statement showing that a party has money available. Genuine POF comes from the party's own bank, about the party's own account.
- MT103: a SWIFT message format banks use to send a single customer payment. A copy shows that a payment instruction was sent; it is not a guarantee that funds arrived or cannot be recalled.
- MT760: a SWIFT message format used to issue guarantees and standby letters of credit between banks.
- MT799: a free format SWIFT message between banks, often requested to show a bank's willingness to do something. It is not a payment and not a guarantee.
- SBLC or bank guarantee: a bank's own promise to pay if its customer does not. Only banks issue these.
Why a paymaster does not issue them
A law firm is not a bank. It cannot send SWIFT messages, and it should not issue letters that a reader might treat as a bank's promise or as vouching for a party, a product or a deal. Letters that overstate what is held, or that are used to persuade a third party to commit money, can expose everyone involved to fraud claims. For that reason, the firm's agreements state plainly that it does not issue proof of funds letters, comfort letters, SWIFT messages, SBLCs or guarantees.
What a paymaster can do
With the client's written approval, the attorney can confirm in writing, to a party named in the payment instructions, the amount of cleared funds actually held in the trust account for the transaction. That is a statement of fact about money already received, not a promise about the future.
Warning signs
Be careful when a counterparty:
- insists on a bank message before any contract is signed;
- asks for a fee to "activate," "lease" or "monetize" an instrument;
- wants a screenshot of a SWIFT screen instead of a payment;
- asks the paymaster to state that funds are "ready, willing and able" before they arrive.
Our article on red flags in oil, gold, PPE and crypto deals lists more of these patterns.
The safer path
A simple structure protects everyone: a signed contract, verified parties, funds wired from the buyer's own account into a trust account, and payment only when the agreed condition is met. If a deal cannot work that way, it is worth asking why.
If you have a transaction and a list of requested documents, call to discuss it before anything is sent.