Collection is an operation often used in international settlements

In order to know exactly what a particular word means from a business vocabulary, it is better to apply to legislative acts. In this article we will analyze the meaning of the term "collection". This concept was reflected in article number 874 of the second part of the Civil Code. According to it, in settlement operations under the scheme of collection, the credit organization must, on behalf of its client and at its expense, make a set of actions to receive payment or accept it from the payer under the contract (it means the consent to pay).

Collection is an operation that is often used in international settlements. In this case, the exporter brings an order for collection to the servicing bank and appends accompanying documents to it. It should be noted that not every financial institution provides such services. The credit institution, in turn, sends the instruction to the country of delivery of the goods, to the correspondent bank, which will interact with the importer. The correspondent financial organization issues the merchandise to the importer, receiving payment from it, which is transferred to the original bank, and then to the exporter.

There are several types of collection - this is the so-called clean and documentary. Documentary is almost always accompanied by the transfer of commercial or commodity documents. It is considered quite risky, since there is a time gap between the receipt of the final payment and the initial transfer of documents to the bank and the shipment of the goods. In addition, when a package of documents arrives at a correspondent bank, the importer may not have the means to pay or even be bankrupt.

What schemes are used to reduce the risk in transactions with collection? These are so-called operations with a pre-received guarantee from a correspondent bank. It is transferred by this credit institution to the bank that works with the exporter. And he, in turn, provides bank guarantees to the company that conducts the export.

A clean collection is an operation where no commodity documents are transferred. Instead, financial documents (check for collection, bills of exchange, etc.) are used for the operation. In this case, if a person owns, for example, a check of a foreign bank, where it is possible to receive money within a limited time, it can apply to a Russian bank for the above operation. The Russian financial institution will require the client to present a passport and fill out a number of documents. After that, the check will be taken and sent by interbank to the issuing bank. If the financial document is in order, the foreign credit institution will transfer the money to the Russian bank, and it will in turn transfer it to the original holder of the check.

Also, foreign currency can be sent to foreign banks for collection. This operation in accordance with Federal normative act No. 173 (adopted in 2003, December 10) is one of the possible transactions concluded between residents of our country. In particular, Sberbank accepts foreign money for collection in Russia.