It was recently in international news that some Russian banks will not be allowed to participate in the SWIFT messaging system. When this came out, it was likely that most people did not really know what this meant and how it would affect world events. There are larger global ramifications that are being considered for this short term inconvenience to what has become a rogue state attacking a neighbor in full view of the world. Banking is the lifeblood of any business involvement, personal and business travel, and so many aspects. This will limit these for those Russians who are innocent of what the government has done.
What Is SWIFT?
SWIFT stands for Society of Worldwide Interbank Financial Telecommunication and is what is known as a Belgian cooperative society. It was started in the 1970s in response to the bank FCNB (now Citibank) having a near monopoly on communications between banks. SWIFT developed a way to communicate without both FCNB and the loud telex systems that were the primary means to send messages. The organization is considered to be owned by the banks that use it and only deal with messages about transactions, not the money involved. This system is focused on the dollar and rarely any other currency.
The first thing to consider is that this affects only certain Russian banks, not all of them. This also does not mean that these banks are being cutoff from communicating, just that they will be using means that are considered less reliable. Basically, the banks that are banned from the use of the SWIFT messaging are now going to have to rely either on other similar services, some sort of other electronic communication, or just plain telephone calls. SWIFT messages follow a set standard and this increases reliability drastically. Iran is the only country that has had bans be put in place, but they seem to function without the system.
It has been noted that in 2021, SWIFT was responsible for 42 million messages in one day on their system and that it is considered completely secure. The American whistleblower Edward Snowden has released information that the NSA keeps track of what the messages state and are able to track where money is going. It also came out that multiple US agencies were doing the same after 9/11. This has started being hindered by SWIFT changing how they store their messages, with the Virginia site not being the primary center for storage anymore. SWIFT has also been successfully hacked more than once, but that is a rarity and quickly handled.
SWIFT is not unique, as there are a few other similar groups that have been started to counteract what some consider the weaknesses of the Society. Russia had already started one and was building it up to move away from the dollar. There is a similar system that the Chinese government has that was started for the same reason. cryptocurrency is considered another way to bypass these systems and the reason that totalitarian governments are trying to gain control of them. There are also three other systems that have been created, and the primary focus is to bypass having to deal with the dollar being the primary currency metric of the world.
As previously stated, there are many US federal government agencies that have currently or have had access to the messages sent via SWIFT. The transactions that they monitor do not even happen between a bank in the United States to other ones globally. One of the uses of the monitoring that has been seen as petty is when the US government used the messages to seize money that went from a Danish man to a German bank. The transaction was to pay for Cuban cigars, and the US government said it violated their laws. The transaction only happened in the EU, which meant no US laws had been violated, as it was legal for the people to do this where they were. SWIFT has been getting pressure to keep limiting US government access.
With the ban of certain banks in Russia, it has to have the people of that nation wondering if they need to strengthen their alternative. The different systems and the advent of cryptocurrency also will mean that the US dollar is being weakened by not being the only currency being used as a transaction in world financial transactions. It will mean that this will weaken the embargo with Iran and allow them to be more free in terrorist funding and nuclear proliferation. The same can happen with North Korea. All of this will also mean that nations will keep growing apart, which can lead to more issues on diplomatic, scientific, and other matters.
While most people will not consider what every ban happening to Russia means, this ban has opened the door on understanding a system that is globally important. This could even mean that the SWIFT messages could become even less significant because of this. There are many talks among governments about what they can do, but what is meant as a neutral system being weaponized more and more can lead to consequences that experts may not have thought of.