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What exactly is the SWIFT system?

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ETFWorldSavior wrote a column · Mar 1, 2022 01:13
The expulsion of Russia from SWIFT, widely acknowledged as the "financial nuke", would be one of the toughest financial measures.

One of the scariest and least likely to be pressed in modern warfare is the nuclear button. In a financial war, that "killer" could be SWIFT.
SWIFT: One of the main channels for transmitting financial information

In May 1973, the five groups brought together 239 banks from 15 countries to form SWIFT, the Global Society for Inter-Bank Financial Telecommunications.

As a non-profit organization of voluntary cooperation among international banks, SWIFT's footprint is almost all over the world, and almost all important financial institutions in the world are members of this organization, creating the most popular, safest and convenient international exchange system.

Currently, the organization is headquartered in Brussels, Belgium, with three clearinghouses in Amsterdam, New York and Switzerland, serving as a hub for information, data, transactions and clearing among international banking peers.

In short, SWIFT is currently a major channel for transferring financial information between international financial institutions.
Why SWIFT is a sanction stick?
Although SWIFT is a neutral organisation, it is hardly free of political influence.

The SWIFT system, based in Brussels, Belgium, is supposed to be dominated by the European Union, but it has repeatedly been used by the US to impose financial sanctions on other countries.

As early as the 1980s, the Us Treasury tried unsuccessfully to gain control of SWIFT's database. After the "9·11" incident, the Financial security and intelligence organizations of the United States gradually strengthened their control over SWIFT system in the name of anti-terrorism.

In 2011, the State Department began monitoring data from the system. Thus, once members of an association in SWIFT are blacklisted by the US Treasury Department, they are at great risk of being cut off from financial transactions with outside banks, which is a blow that most enterprises, financial institutions and even countries cannot bear.

In 2012, the United States and Europe jointly upgraded financial sanctions against Iran, directly excluding four important Iranian banks from the SWIFT system, and then threatened the EU member states that have economic ties with Iran, resulting in the loss of nearly half of Iran's oil export income and nearly 30% of its foreign trade.

After the Crimea incident in 2014, the United States removed seven large Russian banks from the SWIFT system, resulting in the freezing of the payment functions of about 500,000 credit and debit cards and panic runs. In the short term, Russia's major banks have been hit to varying degrees, and much business activity has ground to a halt.

In March 2015, Poland's Foreign minister said at a press conference that the expulsion of Russia from SWIFT was one of the most severe sanctions. He said:
There are many options on the table for sanctions, and cutting off the SWIFT system would be a 'nuclear weapon' that would be damaging to all parties, a very extreme measure."
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