The pros and cons of a SWIFT response

Financial sanctions

The pros and cons of a SWIFT response

Blocking rogue states’ access to the world’s financial-messaging network is a potent measure, but it carries long-term risks

l   SWIFT = the electronic financial-messaging system of the Society for Worldwide Interbank Financial Telecommunication. It provides a template that helps international transfers flow smoothly and be tracked.

l   The network’s very usefulness means it is increasingly being cast in a new role, as a tool of international sanctions

2012	Iranian banks	EU	Nuclear suspicious
2014	Russian banks	EU (Britain/Poland)	Invasion of Ukraine
2015~	Israel Banks? Taiwanese Banks?	Pro-Palestinian Group China	Palestine Conflicts China vs. Taiwan

l   If the sanction is imposed, more than 90% of transactions involving Russian banks cross borders would stop. Foreign firms that do business in Russia would suffer.

Pros:

l   It is one of the effective sanctions for rogue states.

l   It provides useful information against terrorism. Though terrorists know that SWIFT is monitored by spooks, they still use it: they know it bring risks, but sometimes they have no obvious alternatives.

Cons:

l   It could come to be seen as an instrument of foreign policy, thereby weakening its neutrality. (Above examples)

l   It could lead to the creation of a rival. Russia’s central bank is working to develop an alternative network.

l   It might interfere with attempts to track the finances of Islamic State.

Discussion:

l   Which side do you prefer to stand for and why?

l   Should SWIFT impose sanction on Russian banks according to EU request?

l   Do you know other examples that have the same kind of problem?