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SWIFT rejects calls to disconnect Russian banks from its payment system

Out-Law News | 10 Oct 2014 | 2:53 pm | 1 min. read

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has rejected calls to disconnect Russian and Israeli banks from the communication network it operates through which standardised financial messages required for processing transactions are exchanged.

SWIFT said it is neutral and would not bow to "pressure to disconnect financial institutions from its network".

"SWIFT and its stakeholders have received calls to disconnect institutions and entire countries from its network – most recently Israel and Russia," the organisation said in a statement. "SWIFT services are designed to facilitate its customers’ compliance with sanctions and other regulations, however SWIFT will not make unilateral decisions to disconnect institutions from its network as a result of political pressure. SWIFT regrets the pressure, as well as the surrounding media speculation, both of which risk undermining the systemic character of the services that SWIFT provides its customers around the world."

"As a utility with a systemic global character, it has no authority to make sanctions decisions," it said. "Any decision to impose sanctions on countries or individual entities rests solely with the competent government bodies and applicable legislators." The organisation said that as it is based in Belgium it is bound by EU law.

Russia has faced a number of economic sanctions as a consequence of heightened tensions between it and Ukraine. The EU implemented a new round of sanctions against Russia last month. Russia has put in place a number of trade restrictions on certain EU products in retaliation.

Previously, the UK asked the EU to consider preventing Russia from using the SWIFT payments system. A non-binding European Parliament resolution was then issued which called on EU law makers to "consider excluding Russia from … the SWIFT system". The EU previously banned Iranian banks from the SWIFT network.

However, SWIFT said the singling out of its business in the resolution on Russia "interferes disproportionately" it its "fundamental right to conduct business and its right to property" and that it also constituted "discriminatory and unequal treatment".

In a statement issued at the time, SWIFT said: "Explicitly mentioning SWIFT in a European Parliament resolution of this kind on such an international sensitive matter also creates immense damage to our company's reputation. Our mission remains to be a global and neutral service provider to the financial industry."

Banking expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, previously said that banning Russian financial institutions from the SWIFT network would have a "significantly larger impact" than the ban placed on Iran "given Russia's greater role in the international trade and payments spheres".

"It would also be a disturbing development for global banking, pointing to a balkanisation of international banking and payments markets at a time when Europe in particular is struggling to put the global financial crisis behind it," Anderson said. "The consequences of such a step will need to be thought through in detail."