Russia’s invasion of Ukraine has left the world shocked and grieved.
The country can already evade U.S. sanctions using cryptocurrencies but what else can be done?
The European Union, United Kingdom, Canada, and United States stated on Saturday that they would be kicking some Russian banks off SWIFT.
SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. It is a financial-messaging infrastructure that connects the globe’s banks.
It provides a secure way for banks to transmit transfer requests to one another. When money is transferred between accounts it often passes through multiple banks before landing at its destination.
SWIFT provides the directions that allow banks to know where the money should finally land. It also makes sure that the money does not end up in the wrong banks or accounts. The system works across more than 200 countries and territories and 11,000 financial institutions.
The move to block Russian banks from using SWIFT was announced by U.S. and European nations in a joint statement that indicated the new sanctions were meant to “hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”
Richard Nephew, a former senior U.S. State Department sanctions official stated that cutting Russian banks off SWIFT altogether “would cause the Russians a lot of headaches, but I think its value has been dramatically overstated.”
This is because Russia already has its own payment system with 23 foreign banks connected and could also make use of other existing transfer systems such as telex. They may not be very efficient and more costly, but they get the job done.
In 2012, Iran’s banking system was also detained from SWIFT after an EU Council decision. The advocacy group United Against Nuclear Iran (UANI) claimed that Iran’s participation in SWIFT was in violation of US and EU sanctions as well as SWIFT’s company standards. Later in January 2016, most Iranian banks reconnected to the network when the sanctions were lifted in accordance with the Joint Comprehensive Plan of Action (JCPOA).
In 2018, SWIFT once again suspended access to some of Iran’s banks after Trump reimposed United States sanctions against Iran.