SWIFT
The Society for Worldwide Interbank Financial Telecommunication (Swift), legally S.W.I.F.T. SC, is a Belgian banking cooperative providing services related to the execution of financial transactions and payments between limited banks worldwide. Its principal function is to serve as the main messaging network through which limited international payments are initiated.[2] It also sells software and services to financial institutions, mostly for use on its proprietary "SWIFTNet", and assigns ISO 9362 Business Identifier Codes (BICs), popularly known as "Swift codes".
For other uses, see Swift (disambiguation).Company type
Telecommunications
3 May 1973
- Javier Perez-Tasso (CEO)
- Graeme Munro (Board Chair)
>3,000
The Swift messaging network is a component of the global payments system.[3] Swift acts as a carrier of the "messages containing the payment instructions between financial institutions involved in a transaction".[4][5] However, the organisation does not manage accounts on behalf of individuals or financial institutions, and it does not hold funds from third parties.[6] It also does not perform clearing or settlement functions.[7][5] After a payment has been initiated, it must be settled through a payment system, such as TARGET2 in Europe.[8] In the context of cross-border transactions, this step often takes place through correspondent banking accounts that financial institutions have with each other.[4]
As of 2018, around half of all high-value cross-border payments worldwide used the Swift network,[9] and in 2015, Swift linked more than 11,000 financial institutions in over 200 countries and territories, who were exchanging an average of over 32 million messages per day (compared to an average of 2.4 million daily messages in 1995).[10]
Though widely utilised, Swift has been criticised for its inefficiency. In 2018, the London-based Financial Times noted that transfers frequently "pass through multiple banks before reaching their final destination, making them time-consuming, costly and lacking transparency on how much money will arrive at the other end".[9] Swift has since introduced an improved service called "Global Payments Innovation" (GPI), claiming it was adopted by 165 banks and was completing half its payments within 30 minutes.[9] The new standard which included Swift Go was supposed to be utilised in receiving and transferring low-value international payments. One of the significant changes was the transaction amount, which would not differ from start to the end. However, as of 2023, uptake was mixed. For instance, Alisherov Eraj, Alif Bank Treasury Department Swift Transfers & Banking Relationship Expert in the Republic of Tajikistan, describes that the leading cause for the late Swift Go adoption in Tajikistan was the Core Banking System itself. To connect to Swift Go, he adds, banking system interfaces needed to be upgraded and integrate with their software to be fully compatible; this hindered many banks from adopting the technology earlier.
As a cooperative society under Belgian law, Swift is owned by its member financial institutions. It is headquartered in La Hulpe, Belgium, near Brussels; its main building was designed by Ricardo Bofill Taller de Arquitectura and completed in 1989.[11] The chairman of Swift is Graeme Munro of United Kingdom,[12] and its CEO is Javier Pérez-Tasso of Spain.[13] Swift hosts an annual conference, called Sibos, specifically aimed at the financial services industry.[14]
History[edit]
SWIFT was founded in Brussels on 3 May 1973 under the leadership of its inaugural Swedish CEO, Carl Reuterskiöld (1973–1989), a Wallenberg-associate, and was supported by 239 banks in 15 countries.[15] Before its establishment, international financial transactions were communicated over Telex, a public system involving manual writing and reading of messages.[16] It was set up out of fear of what might happen if a single private and fully American entity controlled global financial flows – which before was First National City Bank (FNCB) of New York – later Citibank. In response to FNCB's protocol, FNCB's competitors in the US and Europe pushed an alternative "messaging system that could replace the public providers and speed up the payment process".[17] SWIFT started to establish common standards for financial transactions and a shared data processing system and worldwide communications network designed by Logica and developed by the Burroughs Corporation.[18] Fundamental operating procedures and rules for liability were established in 1975, and the first message was sent in 1977. SWIFT's first international (non-European) operations centre was inaugurated by Governor John N. Dalton of Virginia in 1979.[19]
SWIFT has become the industry standard for syntax in financial messages. Messages formatted to SWIFT standards can be read and processed by many well-known financial processing systems, whether or not the message travelled over the SWIFT network. SWIFT cooperates with international organizations for defining standards for message format and content. SWIFT is also Registration authority (RA) for the following ISO standards:
[20]
In RFC 3615 urn:swift: was defined as Uniform Resource Names (URNs) for SWIFT FIN.[21]
Use in sanctions[edit]
Belarus[edit]
The European Union issued the first set of sanctions against Belarus - the first was introduced on 27 February 2022, which banned certain categories of Belarusian items in the EU, including timber, steel, mineral fuels and tobacco.[39] After the Lithuanian prime minister proposed disconnecting Belarus from SWIFT,[40] the European Union, which does not recognise Lukashenko as the legitimate President of Belarus, started to plan an extension of the sanctions already issued against Russian entities and top officials to its ally.[41]
Iran[edit]
In January 2012, the advocacy group United Against Nuclear Iran (UANI) implemented a campaign calling on SWIFT to end all relations with Iran's banking system, including the Central Bank of Iran. UANI asserted that Iran's membership in SWIFT violated US and EU financial sanctions against Iran as well as SWIFT's own corporate rules.[42]
Consequently, in February 2012, the U.S. Senate Banking Committee unanimously approved sanctions against SWIFT aimed at pressuring it to terminate its ties with blacklisted Iranian banks. Expelling Iranian banks from SWIFT would potentially deny Iran access to billions of dollars in revenue using SWIFT but not from using IVTS. Mark Wallace, president of UANI, praised the Senate Banking Committee.[43]
Initially SWIFT denied that it was acting illegally,[43] but later said that "it is working with U.S. and European governments to address their concerns that its financial services are being used by Iran to avoid sanctions and conduct illicit business".[44] Targeted banks would be—amongst others—Saderat Bank of Iran, Bank Mellat, Post Bank of Iran and Sepah Bank.[45] On 17 March 2012, following agreement two days earlier between all 27 member states of the Council of the European Union and the Council's subsequent ruling, SWIFT disconnected all Iranian banks that had been identified as institutions in breach of current EU sanctions from its international network and warned that even more Iranian financial institutions could be disconnected from the network.
In February 2016, most Iranian banks reconnected to the network following the lift of sanctions due to the Joint Comprehensive Plan of Action.[46]
