Explained: How United States Uses SWIFT to Track International Financial Transactions

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The Danish newspaper Berlingske reported that US authorities have sufficient control over SWIFT to seize money being transferred between two European Union (EU) countries (Denmark and Germany), since they succeeded in seizing around $26,000 that was being transferred from a Danish businessman to a German bank.

New Delhi (ABC Live India): After Russia started War against Ukraine in the month of February 2022, United States and its European Union announced various sanctions on Russia in support of Ukraine including expulsion of Russia from SWIFT.

Before we know what is the current status of west’s threat to exclude Russia from SWIFT we should know what is SWIFT?

What is SWIFT Stands for?

The Society for Worldwide Interbank Financial Telecommunication (SWIFT), legally S.W.I.F.T. SC, is a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide. Its principal function is to serve as the main messaging network through which international payments are initiated.

How SWIFT Comes into Existence?

SWIFT was founded in Brussels on 3 May 1973 under the leadership of its inaugural CEO, Carl Reuterskiöld (1973–1989), and was supported by 239 banks in 15 countries. Before its establishment, international financial transactions were communicated over Telex, a public system involving manual writing and reading of messages. It was set up out of fear of what might happen if a single private and fully American entity controlled global financial flows – which before was First National City Bank (FNCB) of New York – later Citibank. In response to FNCB's protocol, FNCB's competitors in the US and Europe pushed an alternative "messaging system that could replace the public providers and speed up the payment process".

U.S. control over transactions within the EU

On 26 February 2012 the Danish newspaper Berlingske reported that US authorities have sufficient control over SWIFT to seize money being transferred between two European Union (EU) countries (Denmark and Germany), since they succeeded in seizing around $26,000 that was being transferred from a Danish businessman to a German bank.

The transaction was automatically routed through the US, possibly because of the USD currency used in the transaction, which is how the United States was able to seize the funds. The money was a payment for a batch of Cuban cigars previously imported to Germany by a German supplier. As justification for the seizure, the U.S. Treasury stated that the Danish businessman had violated the United States embargo against Cuba.

Monitoring by the NSA

Der Spiegel reported in September 2013 that the National Security Agency (NSA) widely monitors banking transactions via SWIFT, as well as credit card transactions.

The NSA intercepted and retained data from the SWIFT network used by thousands of banks to securely send transaction information. SWIFT was named as a "target", according to documents leaked by Edward Snowden. The documents revealed that the NSA spied on SWIFT using a variety of methods, including reading "SWIFT printer traffic from numerous banks".

In April 2017, a group known as the Shadow Brokers released files allegedly from the NSA which indicate that the agency monitored financial transactions made through SWIFT.

SWIFT had disconnected all Iranian banks from its international network as a sanction against Iran. However, as of 2016, Iranian banks that are no longer on international sanctions lists were reconnected to SWIFT.

Even though this enables movement of money from and to these Iranian banks, foreign banks remain wary of doing business with the country. Due to primary sanctions, transactions of U.S. banks with Iran or transactions in U.S. dollars with Iran both remain prohibited.

In 2014, SWIFT rejected calls from pro-Palestinian activists to revoke Israeli banks' access to its network.

Similarly, in August 2014 the UK planned to press the EU to block Russian use of SWIFT as a sanction due to Russian military intervention in Ukraine. However, SWIFT refused to do so. SPFS, a Russia-based SWIFT equivalent, was created by the Central Bank of Russia as a backup measure.

Source : Wikipedia republished in public interest

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