Out-Law News | 03 Sep 2014 | 10:36 am | 1 min. read
SWIFT is one of Russia's main connections to the international financial system, according to the Bloomberg report. It said that the UK's position was that the EU should expand trade sanctions already imposed on Russia as a result of conflict in Ukraine in order to bring them into alignment with those being imposed by the US.
SWIFT is a global provider of secure financial messaging services which connects more than 10,500 banks, financial institutions and corporations in 215 countries and territories. Although it does not monitor or control the messages that users send through its systems for the purposes of enforcing sanctions, it is governed by Belgian and EU law. This means that it would be required to comply with any EU regulation requiring disconnection.
Disconnecting Russia from the network would not be without precedent. In 2012, SWIFT disconnected a number of EU-sanctioned Iranian banks as part of a programme of financial sanctions against Iran. EU Regulation 267/2012, passed in March 2012, prohibits specialised financial messaging providers such as SWIFT from providing services to EU-sanctioned Iranian banks.
Banking expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, said that any ban would have a "significantly larger impact" than the one 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," he said. "The consequences of such a step will need to be thought through in detail."
According to Russian news agency ITAR-TASS the country's government, banking industry and the Russian Central Bank have already prepared a bill to create a Russian version of SWIFT. Russia's deputy finance minister Alexei Moiseyev told the agency that Russia would go ahead with the bill "as soon as it becomes clear that the Central Bank is technologically prepared to transfer all operations to internal processing inside Russia".
The EU's current package of sanctions against Russia came into force at the end of July. It includes a ban on business between EU firms and certain Russian financial firms, including all majority state-owned banks; trade restrictions on some Russian energy and defence firms; and asset freezes and travel bans against certain wealthy individuals. In response, Russia has banned the importing of food products from EU member states.