The Swift system, the key to leaving Russia economically isolated

The countries of the European Union (EU) keep the possibility of excluding Russia from the Swift payment system, key to economically isolate the country since it determines the bank codes that are necessary to make or receive any international transfer.

The Society for World Interbank Financial Telecommunication (Swift), better known by its acronym Swift, is a cooperative of financial companies, mainly banks, to which it provides services and which has been directed since July 1, 2019 by the Spanish Javier Pérez-Tasso.

It was created in 1973, when it was established in Brussels with more than 200 entities; in 1976 it already had more than 500 members in more than fifteen countries, but it was still in its infancy and it was not until 1977 that the first messages began to be sent, BBVA recalls on its website.

Ten years later, it had 2,161 clients in 61 countries and had already sent more than 192 million messages, and today it has more than 9,000 members worldwide.

The main reason Swift is often known is as an international code that provides its members with an encrypted messaging service that enables international fund transfers.

Swift determines the bank codes, known as BICs, that are necessary to make or receive an international transfer, so it can become a very useful tool for Europe if it wants to isolate Russia economically.

The BIC code, acronym for Bank Identifier Code, also known directly as Swift, is used to identify the beneficiary bank of a transfer and is an international alphanumeric code that can consist of 8 or 11 characters.

The 8-character code includes information on the entity, each country and the locality. And that of 11, in addition to all of the above, includes the specific information of a branch.

When a client makes an international transfer in favor of another, the issuing bank generates an encrypted message, that BIC or Swift code, which indicates how the funds will be delivered to that client, with all kinds of details such as dates, currencies , expenses or through which entities.

It is proof of the irrevocable completion of an international transfer, and provides security and information to the recipient.

The dangers of expulsion

If the Russian financial entities were left out of the Swift system, their banking operations would be seriously complicated because they would not be able to make international payments or collections with the rest of the entities that use this system.

For all purposes, there would be a blockade of bank transfers with the country, which in turn would have collateral effects, since any foreign company that needs to make payments in Russia would not have the option to do so in this way.

OBS Business School professor and expert in digital strategy at Gartner, Martín Piqueras, also warns that Russia would try to find alternatives so that its banks can continue making international transfers if they are expelled from Swift.

For example, he points out, Russia could use the China International Payments System, known as CIPS, which began operating in 2015 with 19 Chinese and foreign banks settling in mainland China and 176 indirect participants covering 6 continents and 47 countries. countries and regions.

This alternative offers its participants payments and international transfers in yuan.

Hence, the decision to expel Russia from the Swift system cannot be taken lightly and even if the EU countries finally request it, it will have to be the committee of this society that decides, since it is the one that has the right to expel or recruit your partners.

In late 2018, Swift decided to suspend access to its system to several Iranian banks after the United States reinstated sanctions against Tehran.