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Five questions about SWIFT [update of 4 March]
Published: 01 March 2022
The European Union has announced that it will disconnect Russian banks from SWIFT. What is SWIFT, who does it belong to, and what are the consequences if a country is excluded?
1. What is SWIFT?
SWIFT is an international messaging system used worldwide to securely exchange payment instructions between financial parties, such as banks and payment service providers. This includes, for example, orders for foreign currency transactions and messages by which banks and other participants give each other payment orders. It also includes information on payments between banks on behalf of their customers. Often these payments involve large amounts of money.
This makes SWIFT an almost indispensable communication link between more than 11,000 banks and other financial institutions in over 200 countries. SWIFT can be used to make bank-to-bank or multi-bank payments.
2. To whom does SWIFT belong?
SWIFT is a private company owned by its members. Its members are financial institutions, mainly banks. SWIFT is therefore not a system owned by the European Central Bank, De Nederlandsche Bank or any other central bank.
The SWIFT company must comply with legislation and sanctions regulations just like any other company. As SWIFT is based in Belgium, European Union legislation and sanction rules apply.
3. What are the consequences for a bank if it is excluded from SWIFT?
As a communication channel, SWIFT is an almost indispensable link between banks and other financial institutions in more than 200 countries. If a bank is excluded from SWIFT it is no longer reachable worldwide. Compare it to email: if you send an email to an email address that does not exist, it will not arrive. The same applies to SWIFT. If a Russian bank is excluded from the system, then it can no longer make or receive payments for its customers internationally. It is no longer connected to other banks in the global SWIFT network. Trading in foreign currencies is also severely restricted. As a result, the bank is seriously obstructed in doing business.
4. Does this also apply to Russian companies outside Russia?
Only banks on the sanctions list are affected. The list may also include subsidiaries of Russian banks in other countries.
Russian banks and companies operating in Europe that are not on the sanctions list must comply with all European Union sanctions just like other banks and companies. This may mean, for example, that they are prohibited from making payments to individuals who are on a sanctions list.
5. What does this mean for Dutch individuals and Dutch companies doing business in Russia?
Once the exclusion takes effect, as of 12 March, it will no longer be possible to make transfers from, through and to the Russian banks excluded from SWIFT. This means that your payment cannot be executed, but also that you cannot receive any payments if a bank excluded from SWIFT is in any way involved in the execution of these payments. This applies to everyone: to all citizens and businesses in Europe.
You can find more information (in Dutch) on the consequences for your incoming and outgoing payments on the website of the Dutch Payments Association (Betaalvereniging Nederland), via this link.
Would you like to know more about the sanctions against Russia and how they work? Read more:
- The sanctions against Russia at a glance
- Latest news on sanctions against Russia
- What do the sanctions against the Central Bank of Russia mean?
- Nine questions on the sanctions and economic consequences of the war
This article was updated and supplemented on 4 March. In the previous version (dated 1 March), the sanctions relating to SWIFT had not yet been declared.
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