What to know as SWIFT blocks some Russian banks

Protesters gather during a rally against the Russian invasion of Ukraine at Syntagma central square in Athens on Sunday, February 27, 2022.

Protesters gather during a rally against the Russian invasion of Ukraine at Syntagma central square in Athens on Sunday, February 27, 2022.

PAN

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 on February 26 with leaders from the European Commission, France, Germany, Italy, the United Kingdom and Canada, USA Today reported.

Russia launched a three-pronged invasion of Ukraine on Thursday, February 24, “bombing cities, towns and villages” as forces advanced towards the capital Kiev.

“Russian President (Vladimir) Putin has chosen a premeditated war that will bring catastrophic loss of life and human suffering,” Biden said in a statement announcing additional sanctions against Russia.

Ukraine, Europe’s second largest nation by land mass, was part of the former USSR until it declared independence in 1991. It is not a member of NATO.

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 connecting banks across the world, Indian news website Mint reported.

Founded in 1973 to end reliance on text telex messages, it is a kind of “Gmail of global banking,” according to the publication.

Delivering an average of 40 million messages a day among 11,000 financial institutions and companies in 200 countries, SWIFT works to “help banks manage transactions around the world,” National Public Radio reported.

“It doesn’t move the money, but it does move 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 headquartered in Brussels, Belgium, the Mint reported. It is supervised by the National Bank of Belgium and other major international banks.

How will the lockdown affect Russia?

The exclusion of some Russian banks from SWIFT ensures “that these banks are disconnected from the international financial system,” the system’s leaders said, according to USA Today.

The cut makes it “more difficult for Russian entities to process transactions” and could harm the Russian economy, undermining its ability to do business globally, the Washington Post reported.

Russia built an alternative to SWIFT after a 2014 hack threat when it took Crimea from Ukraine, but it is not a suitable replacement, according to the publication.

Has SWIFT ejected other banks in the past?

As part of sanctions on its nuclear program, Iran lost access to SWIFT in 2012, USA Today reported. The nation regained some access in 2016, but the expulsion had a serious impact.

“They lost half of their oil export earnings and 30% of their foreign trade,” Vacroux told National Public Radio.

Don Sweeney has been a California newspaper reporter and editor for over 25 years. He has been a real-time reporter on The Sacramento Bee since 2016.

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