The leaders of the European Union on Thursday adopted their toughest sanctions to date against Russia for the invasion of Ukraine. Despite this, they did not decide to disconnect to the country presided over by Vladimir Putin of the international payment platform Swift.
Not all Member States agree to use the entire arsenal in one fell swoop to Europe and there are capitals like Berlin in favor of keeping some ammunition in the chamber in case it is necessary to approve a third package of sanctions. “The consequences of cutting Russia off the Swift need to be assessed,” argued Dutchman Mark Rutte. But what is this payment platform and why is it so important?
What is Swift?
The Society for Worldwide Interbank and Financial Communications (Swift, for its acronym in English) was created in 1973 by 293 banks from 15 countries with the aim of developing a computer platform that would make payments between financial institutions in different countries faster and more secure by standardizing communication between them.
In 1977, it launched its first messaging service between banks, which quickly replaced the technology in place up to that time., the Telex (a data transmission telegraph device). More than 11,000 banking and securities entities, market infrastructures and corporate clients in more than 200 countries and territories (basically all of the world) are currently connected to its platform.
How is it organized and controlled?
Swift is cooperatively owned by the very banks and securities firms that use it. Its headquarters are located in La Hulpe, near Brussels. Its supervision corresponds to the central banks of the G-10 (Belgium, Canada, France, Germany, Italy, Japan, Netherlands, United Kingdom, United States, Sweden, and Switzerland) and the European Central Bank (ECB), and is led by the Central Bank of Belgium. In 2012, the Swift Oversight Forum was created so that information on its supervision could reach a larger number of central banks. (Australia, China, Hong Kong, India, Korea, Russia, Saudi Arabia, Singapore, South Africa, and Turkey).
The shareholders appoint a board of 25 directors of different nationalities, currently chaired by Yawar Shah of US Bank Citi. It is also part of the same Eddie Astanin, president of Russia’s central counterpart entity, as well as José Luis Calderón, from Santander. The first executive of the firm as CEO is the also Spanish Javier Pérez-Tasso.
How many transactions are made through your platform?
The traffic through the network Swift grew 11.2% last year, reaching a daily average of 42 million payment and securities transactions. In addition, it marked a new historical maximum of 50.2 million operations on November 30, which, to put it in perspective, represents an increase of 66% compared to the daily maximum of five years earlier.
According to the firm, around half of these payments are credited in less than five minutes and two thirds in less than half an hour. 44% of transactions originated from Europe, the Middle East and Africa, 41.8% in America and the United Kingdom, and 6% in Asia and Oceania.
What is the situation of Swift in Ukraine and Russia?
The Swift website in Ukraine explains that all international transfers are blocked in the country due to the Russian invasion. “The denial by the Russian Federation of the existence of the Ukrainian state and the attempt to physically eliminate the Ukrainian people should meet with a harsh reaction from the international community.
The Ukrainian Association of Swift Members and User Groups, UkrSWIFTrequests international support to eliminate the Russian Federation and Belarus as countries of the Swift network”, they claim.
The Swift website in Russia It does not refer to the conflict, but it does give an idea of the impact that the country’s departure from the platform could have. According to the information it offers, some 300 financial entities in the country are users of it, more than half of those that operate in Russia and responsible for more than 80% of the transactions. Russia, he adds, is the second country with the most Swift users only behind the United States.
Have other countries already been expelled from Swift?
In 2012, the European Union ordered Swift and similar smaller platforms stop providing service to a number of Iranian banks that had been sanctioned for the country’s nuclear program. “Unplugging the banks is an extraordinary and unprecedented step for Swift,” he explained at the time.
Measures were in force until January 2016, when they were lifted after the agreement reached by Iran, China, France, Russia, the United Kingdom, the United States, Germany and the European Union.
In 2014, the firm came under pressure to pull the plug on other countries. “Swift and its stakeholders” have received calls to disconnect institutions and entire countries from their network, most recently Israel and Russia,” he explained in a release.
“Swift Services are designed to facilitate compliance with sanctions and other regulations by your customers. However, Swift will not take unilateral decisions to disconnect institutions from its network as a result of political pressure.
Swift regrets the pressure, as well as media speculation surrounding it, which risks undermining the character systemic of the services that Swift provides to its clients around the world.
As a company of systemic global public services, has no authority to make sanctions decisions. Any decision to impose sanctions on individual countries or entities rests solely with the competent government bodies and the corresponding legislators,” he argued then.