Russia SWIFT Ban: The US, Europe and many other Western countries are moving to exclude Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an international network for banks around the world to run smoothly Provides the facility of Money Transactions.
It could be the strongest economic sanctions against Russia over its military action in Ukraine, as it would potentially block the country from receiving international payments.
What is SWIFT?
SWIFT is a messaging network used by banks and financial institutions to exchange information related to financial transactions quickly and flawlessly. Belgium-headquartered SWIFT connects more than 11,000 banking and security organizations in more than 200 countries and regions.
Each participant on the platform is assigned a unique eight-digit SWIFT code or a Bank Identification Code (BIC). Let’s say, if someone with a Citibank account in New York wants to send money to someone with an HSBC account in London, Payee has to submit the beneficiary’s account number in London and his or her bank’s eight-digit SWIFT code to his bank. Will happen.
Russia Ukraine Conflict: US, Canada, UK and Europe to block Russian access to SWIFT
Citi will then send a swift message to HSBC. Once this message is received and approved, the money is credited to the required account.
SWIFT is just a platform that sends messages and does not hold any securities or money. It provides the service of standardized and reliable communication to facilitate transactions.
What if someone is kicked out of Swift?
If a country is excluded from most participating financial services platforms, its foreign funding will be impacted, making it completely dependent on domestic investors. This is especially troubling when institutional investors are constantly looking for new markets in new sectors.
At the same time, building an alternative system would be cumbersome and would be even more difficult to link with such a large system already spread. Swift, first used in 1973, went live in 1977 with 518 institutions in 22 countries, its website states. SWIFT itself had replaced the much slower and less dynamic telex.
Are any countries excluded from SWIFT?
Iranian banks were pulled out of the system in 2018 despite resistance from several countries in Europe. “This step, while regrettable, was taken in the interest of the stability and integrity of the wider global financial system and based on an assessment of the economic situation,” Swift said on its website.
How does the organization operate?
SWIFT claims to be fair. Its shareholders, consisting of 3,500 firms worldwide, elect a 25-member board, which is responsible for overseeing and managing the company.
It is regulated by the G-10 central banks of Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, the United Kingdom, the United States, Switzerland and Sweden, along with the European Central Bank. Its lead overseer is the National Bank of Belgium.
The SWIFT Oversight Forum was established in 2012. G-10 participants included the central banks of India, Australia, Russia, South Korea, Saudi Arabia, Singapore, South Africa, the Republic of Turkey and the People’s Republic of China. Europe, the Middle East and Africa are the largest contributors to SWIFT.
According to data from its website, in 2021, the SWIFT financial messaging platform recorded an average of 42 million FIN messages every day. The full-year figure was an increase of 11.4% on a year-on-year basis.
Europe, the Middle East and Africa combined sent about 4.66 billion messages. The US and the United Kingdom ranked second with 4.42 billion interactions, while Asia Pacific ranked third with nearly 1.50 billion messages.
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