Russia Is Getting Cut Out of the SWIFT Network
SWIFT is making headlines due to the ongoing Russia-Ukraine conflict. As of February 26, 2022, a number of countries announced that they would cut some Russian banks off from SWIFT. These sanctions are bringing the SWIFT system into sharper focus and many people are asking what they mean.
Dimitri Dadiomov, CEO and Cofounder of Modern Treasury, offers a useful :
“Imagine if Russia is a store, and Visa/MasterCard cut it off. This makes commerce way harder. That's SWIFT. It's how international banks talk to each other. It's payments and messaging. Without SWIFT, they're back to moving bags of cash.”
What Is SWIFT and What Is Its Global Influence?
SWIFT, the Society for Worldwide Interbank Financial Telecommunication, is the universally accepted messaging system for financial institutions sending global payments. At its core, SWIFT consists of a messaging platform, a computer system to validate and route messages, and a set of message standards.
The network doesn’t transfer any physical funds, but it provides a standard way to send payment orders and let users know when they have arrived. This centralized communication system allows for smooth and efficient money movement across borders.
With foreign currencies and transactions, money often moves between multiple banks before reaching its final destination. Banks around the world send and receive wire transfer instructions via a unique SWIFT code that identifies the country, bank, and branch where an account is registered. The SWIFT network routes messages with instructions from one bank to another, signaling where the money will land. It sends more than 40 million messages a day, linking 11,000 banks and institutions, as well as governments and companies, in more than 200 countries.
In short, as the most widely used network for international communication between banks—not to mention the most accurate, efficient, and secure— SWIFT is critical to the function of global money movement. The alternative to which is not far from bags of cash.