Financial Guarantee Essentials: What is an ATV Letter?
An “Authorization to Verify” (ATV) letter verifies that a bank or financial institution is familiar with the account holder that signs the letter, showing adequate capacity to deliver the required CAP Security.
Although not being asked to deliver it now, ATV letters allow In3 underwriting to check that the involved banker will be able to proceed when the time comes on behalf of their client for the specific financial undertaking (transaction).
In practice, the wording of the letter depends on the form of Security — either a cash surety deposit, bank-involved instrument (like the Standby LC) or an approved form of securities, such as gold, MTNs, registered and rated bond or public equities. Select the right template from this folder.
Quick access ATV letter templates: Cash Surety Deposit | Standby LC (SbLC) | All others
Once completed and signed, clients or their sponsors must share the letter with the involved banker, so that banker is prepared to respond to an inquiry from In3’s underwriting to confirm this capacity. Their response would need to indicate a willingness to proceed with the remaining steps, where delivery of the Security is the last step before closing, and contingent upon successful due diligence of the project file and entering an agreement with the client for the funding.
If all goes well, a binding offer to invest in the project will follow our streamlined due diligence. That will signal that it is time to offer further funder and client specifics to put the project’s funding under contract with all terms and conditions spelled out, then signed and notarized, with most banks using a tracking code to tie the Security to the contract. The contract governs the use of this Security, including how it held and the rights and obligations of both parties.
How does it work?
An ATV letter will follow the recommended templates for that type of Security. Each one is slightly different, so be sure to use the template that matches the type of Security you have arranged. Here is the folder of ATV letters by type template for a BG/SbLC), each one allowing In3 underwriting to confirm capacity for the designated security, while also serving to authenticate the involved banker’s contact information.
Any sensitive information in the ATV letter for the bank’s customer or the guarantee’s “sponsor” can be redacted, if such restrictions exist. Share the unredacted version with the involved banker, and the redacted one with us. The banker’s Email address must not be withheld as it will be used to verify the capacity and intent to issue the Security later in the process.
Helping the sponsor and involved banker understand the ATV letter
First, we are not asking for their commitment to do anything ahead of finalizing the contract for funding.
Once all contracts have been negotiated, agreed, signed and notarized, the instrument moves to the Beneficiary’s bank as Security for the funding as the last step to reach financial closing. If using cash as a surety deposit, the funds are moved into a custodial account opened in the client’s name, or if using a Standby LC (SbLCs are the bank’s guarantee), or similar instrument, the ATV letter launches due diligence, and if all goes well, the project’s funding commitment comes next, then the instrument is sent via SWIFT MT799 pre-advice to confirm the funding bank’s commitment to deliver the contractually arranged capital, followed by MT760 and SbLC hardcopy (sent via bonded courier) to become an “operative” instrument.
From that point forward, the funding agreement may be tracked by the issuing bank; in fact, a tracking code is assigned by the issuing bank that is usually included in the “header” of the final SWIFT notice, as the agreement to fund and the security for that funding are interconnected, comprising the commercial context. The funding agreement is what determines how the security is to be used.
What if the ATV letter is not available?
If a party is uncomfortable with the ATV letter, suggest they fill it out completely then redact it so that it would be acceptable to them.
There are three known alternatives to this ATV letter, though ATV letters are most often used, so you might want to focus on understanding and removing the obstacle(s) — whatever appears to be in the way — before considering any other method. All four options, in order of preference:
- ATV Letter — using the right template, filled in and signed by the bank account owner used for the Security.
- Direct Email between the involved banker and In3’s underwriting department.
- Licensed accounting firm’s audit report of the party that will deliver the Security for the transaction. The accounting firm must be credentialed and recognized as a major firm.
- Legal attestation (preferably a licensed attorney at one of the larger firms) via their IOLTA trust account.
The RWA and ATV letters do not provide any actual guarantee of anything, nor obligate the bank to deliver the instrument — it is only an expression of the capacity and intent to do so. It also helps flush out concerns, objections, or misunderstandings and thus helps avoid wasting time. Basics like proof-of-funds from our side become available prior to contractual commitments, and there are layers of mutual KYC protections, described here.
Recap & Conclusions
An ATV letter verifies the capacity to provide the referenced security. No money should change hands at that point. Modifications to the wording of our templates are allowed so long as they still upholds the overall intent to verify capacity with the involved banker that knows the Security’s account holder, and allow In3’s underwriting to confirm and authenticate the banker’s identity.
ATV and RWA letters also form an integral part of In3’s funding partner due diligence. The ATV letter enable clients to proceed through the steps of pre-qualifying to launch due diligence and then (if all goes well), reach binding terms for funding, financial closing and drawdown of funding to complete and commission the funded project(s).
Next Steps
Start with an Email exchange with the involved banker(s) to confirm their participation. Ask us or your In3 Affiliate for the appropriate ATV letter templates for your situation. We will let you know when the ATV letter has been accepted. Be sure to notify the banker when they should expect to hear from In3 underwriting.