Key Tested Telex (KTT) 

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Similarities and differences between KTT and SWIFT transfers. 

Both are communication systems used for transmitting payment instructions between banks, but they differ in terms of technology, security, and adoption.


  1. Purpose: Both KTT and SWIFT transfer-instructions are used to send payment orders between financial institutions across borders. They facilitate the exchange of information and instructions necessary for completing international transactions through Nostro-Vosto corresponding bank accounts.
  2. Standardization: Both systems rely on standardized message formats to ensure that financial institutions can accurately interpret and process the information being transmitted.


  1. Technology: KTT transfers-instructions rely on telex technology, which is an older communication system that uses teleprinters to send text-based messages. SWIFT transfer-instructions, on the other hand, utilize a more modern, secure, and efficient digital messaging system.
  2. Security: SWIFT instructions are considered to be more secure than KTT instructions due to the use of advanced encryption methods and secure protocols. KTTs, being based on older telex technology, are more vulnerable to potential security risks.
  3. Speed: SWIFT messages are generally faster than KTT messages. The digital nature of SWIFT messaging allows for quicker transmission and processing of payment instructions, while KTT instructions can be slower due to the limitations of telex technology.
  4. Adoption: SWIFT is the globally dominant financial messaging system, with over 11,000 financial institutions in more than 200 countries and territories participating in its network. KTT transfers, meanwhile, are less commonly used today, having been largely replaced by the SWIFT system.
  5. Message Types: SWIFT supports a wide range of message types, including those related to payments, securities, trade services, and foreign exchange, among others. KTT transfers, in contrast, have a more limited scope, focusing mainly on payment instructions.

SWIFT orders are more widely adopted, secure, and efficient due to their use of modern technology. KTT messages, based on telex technology, are less common and less secure in comparison.

While KTT and SWIFT messages are critical for communicating the details and instructions for these transactions, they do not themselves facilitate the actual fund transfer. The distinction is important for understanding the roles and limitations of different systems in the financial transaction process. The KTT (Key Tested Telex) and SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging systems are utilized primarily for the transmission of payment instructions, transfer details, and other types of financial information between banks. These systems facilitate secure and efficient communication but do not directly handle the physical transfer of funds. Instead, the actual movement of currency is executed through different mechanisms. These include:

  1.  Correspondent Bank Accounts: Banks often use nostro-vostro accounts held with each other to settle transactions. When a transfer is initiated, the sending bank’s account is debited, and the receiving bank’s account is credited. This process can involve multiple banks, especially for international transfers.
  2. Real-Time Gross Settlement (RTGS) Systems: These are specialized payment systems where the transfer of money or securities takes place from one bank to another on a “real-time” and on a “gross” basis. Settlement in “real-time” means payment transactions are not subjected to any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the transaction is settled on a one-to-one basis without bundling or netting with any other transaction.
  3. Instant Payment Systems: These are modern financial transfer methods that enable immediate or near-immediate fund transfers between banks and financial institutions. This system is particularly useful for consumer transactions and is gaining popularity due to its speed and convenience.

A nostro account (short for "nostro vostro account") is an account that a bank holds with another bank for instance in a foreign country, typically in the local currency. These accounts facilitate international transactions by acting as a bridge between the banks involved in a transfer. The term "nostro" is derived from Latin, meaning "our account with you," while "vostro" means "your account with us."

Here's how nostro accounts are typically used in international money transfers:

  1. Initiating the transfer: When a customer wants to make an international money transfer, they approach their bank (Bank A) with the relevant details, such as the beneficiary's name, account number, and the receiving bank's information (Bank B). Bank A informs Bank B as the recipient of the transfer (MT103)
  2. Correspondent banking relationship: For the transfer to occur, Bank A and Bank B must have a correspondent banking relationship, meaning they either have nostro accounts with each other or use intermediary banks that have nostro accounts with both Bank A and Bank B or Bank A has another corresponding bank relationship with Bank C.
  3. Payment instruction: Bank A sends a payment instruction to Bank B, if they have a corresponding bank relationship, or to the intermediary bank Bank C, if not, using a secure messaging system like SWIFT or KTT (MT202). This message contains all the necessary details for the transaction, such as the amount to be transferred and the beneficiary's account information.
  4. Debiting and crediting accounts: Upon receiving the payment instruction, Bank B or the intermediary Bank C debits the nostro account held by Bank A and credits the beneficiary's account with the transferred amount. Concurrently, Bank A debits the customer's account for the transferred amount plus any applicable fees.
  5. Reconciliation and settlement: At the end of the day, both banks reconcile the nostro and vostro accounts to ensure that all transactions have been accurately recorded and settled.

Using nostro accounts in this manner allows for the efficient transfer of funds between different countries and currencies while minimizing the need for physical movement of cash. These accounts also help banks manage their foreign exchange risk by holding funds in various currencies.

Although KTT transfers utilize nostro accounts in a similar manner to other international money transfers like SWIFT, the telex-based communication system makes KTT transfers slower and less secure compared to more modern systems like SWIFT. 

As a result, KTT transfers are less common today, with most financial institutions opting for the more efficient and secure SWIFT system for international transactions.

KTT Currency Transfer Structure 

with KTT 103 & KTT (or SWIFT) 202 COV instructions 

Actual Fund Transfer:  These protocols are adept at transmitting transaction details, such as messages and instructions, yet they do not facilitate the actual movement of funds. For the physical transfer of funds, systems such as corresponding banking, Real-Time Gross Settlement (RTGS), and Real-Time Payments (RTP) are indispensable. In corresponding banking, funds are moved between accounts at different banks. In the RTGS system, funds transfer occurs between compensation accounts within the central bank(s). Similarly, in the RTP system, funds are transferred between clearing accounts. These systems are critical for the actual transfer of monetary assets. Therefore, it is imperative that the sending bank not only possesses telex capabilities but also maintains full integration with the banking system.

KTT Funds Transfer to us

To alleviate some compliance concerns when an MT 103 was sent per KTT instead of SWIFT to us, you could consider your sending bank including the following additional information in the MT 202 COV within the correspondent bank to correspondent bank transmission of funds, where the format allows:

  1. Ordering Customer Information: Provide details of the ordering customer, similar to Field 50 in MT 103. This can include name, address, and account number.
  2. Beneficiary Information: Include details of the beneficiary, mimicking Field 59 in MT 103. This should have the beneficiary name, address, and account number.
  3. Purpose of Payment: Explicitly state the reason for the transaction, which could alleviate some Anti-Money Laundering (AML) concerns.
  4. Regulatory Reporting Information: If your jurisdiction requires, include codes or identifiers for regulatory reporting.
  5. Reference to KTT MT 103: A specific mention that the MT 202 COV is tied to a KTT MT 103, can provide context to the intermediary bank.
  6. Contact Information: Include specific contact details for the compliance department or transaction manager responsible for this payment, in case the receiving bank needs immediate clarification.
  7. Special Handling Instructions: Any extra instructions for the receiving bank that could facilitate the identification and proper handling of the transferred funds.
  8. Charges and Fees Information: In absence of an SWIFT MT 103, it might be beneficial to clarify who will bear transaction-related charges to prevent misunderstandings.
  9. Additional Identifiers: Include any additional transaction identifiers that can link the MT 202 COV to the KTT MT 103, such as invoice numbers or internal transaction IDs.

Note on Compliance
Including additional information in the MT 202 COV may not fully mitigate compliance risks, especially AML and CFT (Combating the Financing of Terrorism) checks that are typically addressed with a SWIFT MT 103 message and it's important to ensure that the modified MT 202 COV still complies with applicable standards and interbank agreements.

If you want to know more about how to transfer funds through the corresponding banking system, please get in contact with our Head of Corresponding Banking M. Amri Elarisse