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What is SWIFT and what will come out of ban on Russia from SWIFT?
We hear all about Vladimir Putin's military operation in Ukraine followed by Western allies' ban on Russia from SWIFT but do we know what is SWIFT?
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a system that runs on a network of financial institutions. It is used by thousands of banks worldwide to communicate information on financial transactions.
SWIFT is used to communicate money transfers between two banks. When two banks have a established relationship, the transfer is complete as soon as the SWIFT message has been received. When money is transferred from one's personal account to another person's account via the banks' commercial accounts, banks take a fee. If the two banks do not have a relationship, an intermediary bank will facilitate the process. For that, you will be charged an additional fee. If the transfer involves two currencies , the currency exchange will be done by one of the banks, an additional fee will be charged here again.
SWIFT is a cooperative, which means it's not controlled by any one country but governed by a 25-person board of directors and overseen by the G-10 country central banks. SWIFT acts a neutral utility, so it is not supposed to make any decisions on sanctions. However, because SWIFT operates under Belgian law, it must comply with any EU regulations, including sanctions. The last occurrence was the restrictions EU Regulation placed on Iran in 2012.
Also, the Council of the EU introduced a measure to ban the transfer of Euro cash to any person or organization in Russia.
Sanctioned Russian banks are blocked from Apple Pay and Google Pay services, along with Mastercard and Visa.
Financial sanctions on Russian banks and martial law declared in Ukraine are rapidly changing the financial landscape. Residents in both countries are experiencing limited access to funds and payment methods. Businesses with clients and workers in Ukraine and Russia may need to change the way they make payments. We'll see if they can come up with alternative ways or mind-blowing innovations to move money in desperate efforts to keep the economy alive.