Reject or return in correspondent banking checkpoint
Check whether you can tell a reject from a return by settlement, not preference, and reason through recovering a cover payment after both its legs have settled.
QUESTIONS AS TEXT
Q1. A correspondent bank refuses a payment instruction before any interbank settlement occurs. What travels back, and what needs to be reversed?
Answer: A: A negative pacs.002; nothing needs reversing, since no money crossed between the two banks.
A reject travels as a negative pacs.002 and happens before any interbank settlement on that leg, so there is nothing to reverse — the clean property that distinguishes a reject from a return, which only applies once value has actually crossed.
Q2. Unlike SEPA, where the EPC rulebook fixes how many business days a beneficiary bank has to return a settled transfer, what governs return timing in correspondent banking?
Answer: A: The bilateral correspondent relationship and market practice between the two banks — there is no scheme-wide return deadline.
Correspondent banking carries no scheme-wide return deadline the way SEPA's EPC rulebook does — whether, and how quickly, a correspondent returns settled value depends on the bilateral relationship and market practice between the two banks involved.
Q3. A cover payment has fully settled: the creditor agent credited the beneficiary, and the correspondent completed the cover's book transfer. The debtor now reports fraud. Why can't Bank Alfa recover the payment with a single cancellation request?
Answer: A: Because the payment settled in two separate places — the beneficiary credit and the cover value — and each needs its own case with its own bank.
A cover payment settles in two places: the beneficiary credit at the creditor agent, and the cover value's book transfer at the correspondent. Recovering it after both have settled means a dual-leg recovery — two coordinated cancellation cases, tied together by the shared UETR, each needing its own request and its own answer.
Q4. In the dual-leg recovery case, Cassia's cover-leg recovery is accepted. What actually moves the recovered cover value back to Bank Alfa?
Answer: A: A new pacs.004, creating a fresh settlement entry alongside the original pacs.008 and pacs.009 COV.
An accepted cover-leg recovery produces a new pacs.004 returning the cover value — a fresh settlement entry standing alongside the original pacs.008 and pacs.009 COV in the audit trail, not a deletion of either. Reconciliation only closes once both camt.029 outcomes and this reverse entry tie back to the same UETR.