World Economy

SWIFT Refuses to Suspend Russia

SWIFT Refuses  to Suspend Russia
SWIFT Refuses  to Suspend Russia

SWIFT will not bow to pressure to disconnect Russia from international transactions as it has "no authority" to make unilateral sanctions decisions, the Belgium-based group said Monday.

"SWIFT regrets the pressure, as well as the surrounding media speculation, both of which risk undermining the systemic character of the services that SWIFT provides its customers around the world. As a utility with a systemic global character, it has no authority to make sanctions decisions," RT quoted the group statement as saying.

The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is currently one of Russia’s main connections to the international banking system, and if turned off, could hurt Russia's economy, in the short-term.

"SWIFT services are designed to facilitate its customers’ compliance with sanctions and other regulations, however SWIFT will not make unilateral decisions to disconnect institutions from its network as a result of political pressure," the communique said.

EU Decisions

In August it was reported that EU leaders were discussing disconnecting Russia from using SWIFT as a form of sanctions for its alleged role in the Ukraine conflict.

However, Brussels-based SWIFT has to comply with EU decisions because it is incorporated under Belgium law.

"Any decision to impose sanctions on countries or individual entities rests solely with the competent government bodies and applicable legislators. Being EU-based, SWIFT complies fully with all applicable European law," the statement said.

Many are calling on SWIFT to shut off services in Israel to quickly isolate the economy from international trade in order to encourage Israeli troops to withdraw from occupied Palestinian lands.

Transactions in South Africa were blocked to help overturn apartheid rule in the 1980s.

The SWIFT system transmitted more than 21 million financial messages a day last month between more than 10,500 financial institutions and corporations in 215 countries.

Home-Grown Solutions

Currently Russia is working to create its own domestic money transfer system to eventually replace SWIFT.

Also in the works is a national payment system, after US-based Visa and MasterCard cut off Russian clients associated with banks sanctioned by the US. In response, the Russian government will now require these companies to pay a security deposit to the Central Bank.

In August, Russia debuted its China UnionPay credit card system, an alternative to Visa and MasterCard. Some of the countries' top bankers, like Andrey Kostin, the head at VTB, Russia's second largest bank, is even talking about completely switching Russia from dollar payments.

US Threatens SWIFT

In 2012, the US pushed the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to halt processing Iran’s monetary transactions. The Belgium-based SWIFT is a secure messaging system used by more than 10,500 banks for international money transfers.

The US threatened to penalize SWIFT if it did not cut its ties with Iranian banks. SWIFT handles a large portion of the world's electronic money transfers. As a result, on March 15, 2012, SWIFT cut off processing of Iranian banks’ transactions.

The action extended the EU sanctions on the Central Bank of Iran, which had been previously exempted.

Last year, a European Union court ruled against the EU banking sanctions imposed on two of Iran’s largest banks. The EU’s General Court ruled that, in the case of Bank Saderat, there was insufficient evidence demonstrating that the bank was involved in a nuclear program.

The court issued a similar ruling in the case of Bank Mellat, the largest private sector lender in Iran.

 Boycotted by the EU since July 2010 and blocked out of SWIFT since March 2012, the two banks had filed suit with the European court to challenge those sanctions.