Swift is an international payment network for financial institutions and has headquarters in Belgium. It does not facilitate fund transfers but instead makes it possible for financial institutions to send information about the transfer of funds between two parties.
The Society for Worldwide Interbank Financial Telecommunication, more commonly known as SWIFT, provides the standards for communication and security between banking institutions, making it one of the most utilized and trusted networks for interbank payments.
How does Swift work? By the late 1970s, SWIFT had established a strong presence in the banking industry. Soon after, SWIFT began to offer new capabilities and services, including treasury processing and "cash-netting," which allowed multiple payments between individuals within a corporation to offset each other. In addition, SWIFT launched the Standardization of Private Market Operations Network (SPMOR), which was a network for moving money and securities in the private sector.
Russia is introducing a bill that will allow it to cut off its financial system from the rest of the world.
This legislation is aimed at providing further protection against possible U.S. sanctions and may be signed by President Vladimir Putin as early as next week.
The bill would require banks in Russia to be able to process all domestic payments, including credit and debit card transactions, within Russia itself.
Currently, Russia processes many such card transactions through SWIFT. The U.S. has threatened to sanction SWIFT over its dealings with Iran, which could leave Russian banks unable to process card transactions if they were cut off from the network.
The law would give Russia's central bank the power to enforce this change by banning banks from using foreign processing systems.
Russia is a major user of SWIFT, which processed $1 trillion worth of payments for Russian customers last year through subsidiaries based in Switzerland and elsewhere outside of U.S. jurisdiction. The proposed law could have an impact on numerous international companies that have issued cards in Russia.