Contractual payment sequence
Define the event that makes each payment due: inspection, documents, title transfer, delivery, acceptance or another condition. Avoid structures requiring material payment before critical evidence is obtained.
Commodity Knowledge Centre
Payment & Finance
Align payment with evidence, title transfer, inspection, bankability and AML/sanctions controls before funds become exposed.
Core verification controls
Treat each control as a separate evidential question. A credible transaction should remain coherent when the documents, parties and physical sequence are tested together.
Banking instrument and message
Distinguish MT103, LC, SBLC, documentary collection, escrow and other mechanisms. Each has a different purpose, issuer, conditions and risk profile.
Bank, account and beneficiary
Verify that beneficiary, bank, jurisdiction and account align with the contractual counterparty. Third-party payments require enhanced legal and economic justification.
Source of funds and financial capacity
For buyers or complex structures, payment capacity and source of funds may require verification consistent with KYC/AML and bank policy.
Trade finance documentation
Test whether documents, Incoterms, presentation rules, discrepancies, timing and confirming/correspondent banks make the proposed financing structure executable.
Fees, deposits and guarantees
Analyse tank-extension, allocation, registration, insurance, broker or other advance fees. They should correspond to a real service, identifiable obligor and clear remedies.
Evidence that should exist
- Payment clauses tied to verifiable milestones.
- Appropriate banking instrument with coherent issuer and beneficiary.
- Collection account linked to the contractual party or documented rationale.
- Sufficient capacity/source-of-funds evidence where material.
- Banking and trade-finance route compatible with sanctions and compliance controls.
Red flags requiring escalation
- MT799/MT199 or similar messages presented as automatic proof of funds or product.
- Last-minute beneficiary or bank-account changes.
- Non-refundable fees before product/authority verification.
- Payments to individuals or unrelated third parties.
- Sequences that prevent independent inspection before material disbursement.
Verification sequence
- Map every payment to its condition precedent.
- Verify counterparty, beneficiary and participating banks.
- Assess instrument, documents and trade-finance mechanics.
- Review AML/sanctions/source-of-funds and unusual fees.
- Issue an acceptable, conditional or unacceptable payment sequence.
Decision output
Record what is confirmed, what remains unverified, the residual risk, the conditions precedent and one explicit decision state.
GO
Evidence supports proceeding.
CONDITIONAL GO
Proceed only after stated conditions are satisfied.
HOLD
Pause until material evidence is obtained.
NO-GO / STOP
Risk or missing evidence makes continuation indefensible.
Frequently asked questions
Does an MT103 prove the underlying deal is legitimate?
No. It evidences a bank transfer in its own context; it does not prove that the commodity existed or that the wider transaction was legitimate.
Should a fee be paid to secure product or tank capacity?
Only after establishing who charges it, what service is being purchased, the legal obligation, whether the practice is reasonable and what protection the payer has.
Why can a bank reject a commercially valid transaction?
Each institution applies its own sanctions, AML, correspondent-banking, country-risk, documentation and risk-appetite controls.
Continue the verification
Use this module together with the other Commodity Knowledge Centre controls and the MGS DD1/DD2/DD3 methodology. If a real transaction requires review, start with a preliminary assessment before committing to a full mandate.