Why SWIFT Matters To Russia

There are 862 individual SWIFT codes of Russian origin, belonging to somewhere around 300 financial institutions out of a total in the bank network of 11,000 and removing them from the network would prevent those banks from using the network to facilitate transfers.

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SWIFT (Society for Worldwide Interbank Financial Telecommunications) was developed in Belgium in the 1970s to facilitate international and inter-bank money transfers…

@$$4$For a bank to send money to another bank, it needed to have an account with that other bank, a banking relationship, but no bank in the world had an account with every other bank in the world as that would create too much paperwork…so, some Belgians developed a system of common standards by which bank transfer requests and payment confirmations could be made, and a secure network over which they could be sent…

Once the SWIFT common standard had been established, the Belgian co-operative was able to build and operate a secure network over which the SWIFT “language” could be used to send transfer requests and payment receipts: the SWIFT network. The network doesn’t handle the money being transferred, it routes the messages between the banks that are making the transfers.

Banks that don’t have accounts with one another still need to send transfers through middleman banks to get the money where it’s meant to go, but communicating through common standards on a secure network makes it easier for them to find and become transaction middlemen, and prevents any single financial monoliths from becoming payments clearinghouses and controlling global finance…

A bank that isn’t on the network can’t use it to send or receive payments, and can’t facilitate payments either. There are 862 individual SWIFT codes of Russian origin, belonging to somewhere around 300 financial institutions. Removing those 300 banks from the 11,000 bank network wouldn’t leave a hole that the network itself can’t work around but it would prevent those banks from using the network to facilitate transfers. That means anyone who wants to send money to the Gazprombank St. Petersberg Branch to secure natural gas delivery is going to have to arrange for it outside of SWIFT, and chances are, they will.

Russia has already developed a SWIFT clone called SPFS. It is used mostly within Russia, but has been connected to 23 foreign banks as of 2020, and nothing is preventing it from welcoming more banks on board. Foreign banks linked in to both systems could also act as connecting hubs, making SPFS a functional extension of SWIFT.

A de-centralized network is more difficult to impede than a centralized one, but it isn’t impossible. If the US, EU and UK were committed, they could go after the bridge banks, and threaten to cut them out of SWIFT too, but that could get awkward if they balked. Any node that’s cut out of a working network creates a gap, and if the gap makes routing impossible on the network, the nodes trying to make the connection are bound to work on a way to make the connection off-network…

The above version of the original article by Braden Maccke (thedeepdive.ca) was edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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