"You must have been listening to SWIFT lately due to the Russian-Ukrainian war crisis, let's learn a little about SWIFT."
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a Belgian cooperative that provides services related to the execution of financial transactions and payments between banks around the world.
It was established in 1973 and connects more than 11,000 banks and other financial institutions in 200 countries.
SWIFT does not operate by transferring funds electronically but, instead serves as a messaging system (sending and receiving information quickly, accurately and securely) that allows the world’s network of financial institutions to exchange funds.
According to the report, SWIFT recorded an average of 42.1 million messages a day in January 2021.
In addition, the main purpose of SWIFT is to prevent monopolies and standardize the system in each institution.
It is overseen by the National Bank of Belgium and works with major central banks around the world such as the United States Federal Reserve (FED) and the Bank of England (BOE).
Brief Facts About SWIFT
It is a member -owned cooperative that provides safe and secure financial transactions for its members.
Its payment network allows individuals and merchants to make electronic or card payments even if the customer uses a different bank than the recipient.
The way it works is by giving each member of the institution a unique ‘ID code’ that identifies not only the name of the bank but the country, city and branch.
The Effect of SWIFT Restrictions on a Country
Taking the situation of SWIFT sanctions against Russia, the effect is:
Companies in Russia are losing access to the smooth and immediate transactions provided by SWIFT.
Payments for valuable energy and its agricultural products will be severely affected.
Banks have to deal directly with each other, which adds to delays, increases costs and reduces revenues of the Russian government.
