What is SWIFT? What to know about ouster of Russian banks after Ukraine invasion
An international banking system known as SWIFT has blocked some Russian banks in response to the invasion of Ukraine, the White House announced.
The news came in a joint statement Feb. 26 with leaders of the European Commission, France, Germany, Italy, the United Kingdom and Canada, USA Today reported.
Russia launched an invasion of Ukraine on three fronts early Thursday, Feb. 24, “bombarding cities, towns and villages” as forces advanced toward the capital of Kyiv.
Russian “President (Vladimir) Putin has chosen a premeditated war that will bring a catastrophic loss of life and human suffering,” Biden said in a statement announcing additional sanctions against Russia.
Ukraine, the second-largest nation in Europe by land mass, was part of the former USSR until it declared independence in 1991. It is not a NATO member.
Here’s what you need to know about SWIFT.
What is SWIFT?
The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is a messaging network that connects banks around the world, India news site Mint reported.
Founded in 1973 to end reliance on written telex messages, it’s kind of the “Gmail of global banking services,” according to the publication.
By delivering an average 40 million messages a day between 11,000 financial institutions and companies in 200 nations, SWIFT acts to “help banks manage transactions around the world,” National Public Radio reported.
“It doesn’t move the money, but it moves the information about the money,” Alexandra Vacroux, executive director of the Davis Center for Russian and Eurasian Studies at Harvard University, told NPR.
The member-owned cooperative is based in Brussels, Belgium, Mint reported. It’s overseen by the National Bank of Belgium and other major international banks.
How will the lockout affect Russia?
The exclusion of some Russian banks from SWIFT ensures “that these banks are disconnected from the international financial system,” leaders of the system said, according to USA Today.
The cutoff makes it “more difficult for Russian entities to process transactions” and may hurt the Russian economy by crippling its ability to do business globally, The Washington Post reported.
Russia built an alternative to SWIFT after a threatened 2014 cutoff when it seized Crimea from Ukraine, but it’s not an adequate replacement, according to the publication.
Has SWIFT ejected other banks in the past?
As part of sanctions over its nuclear program, Iran lost access to SWIFT in 2012, USA Today reported. The nation regained some access in 2016 but the ouster had a serious impact.
“They lost half of their oil export revenues and 30% of their foreign trade,” Vacroux told National Public Radio.
This story was originally published February 27, 2022 at 11:56 AM with the headline "What is SWIFT? What to know about ouster of Russian banks after Ukraine invasion."