Full form of SWIFT – What Does SWIFT Stands For – Abbreviation – Acronym


Full form of SWIFT: – The full form of SWIFT is Society for Global Interbank Financial Telecommunications. SWIFT is a member-owned cooperative that delivers secure financial transactions for its members. Established in 1973, SWIFT uses a standardized patented communications platform to facilitate the transmission of financial transaction information.

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Financial institutions securely exchange this information, including payment instructions, between them. SWIFT has also developed a list of bank identification codes (BICs) that are assigned to any bank involved in international money transfers.

A SWIFT code identifies the name of the bank and the city and country where the branch is located. Also called the World Interbank Financial Telecommunications Society.

SWIFT is organized under Belgian law and is owned and controlled by its member shareholders, which include more than 2,300 financial institutions in 209 countries. The SWIFT user base exceeds the 9,300 connected users. SWIFT is supervised by the central banks of the Group of Ten countries.

SWIFT has signed a protocol with the National Bank of Belgium (“NBB”) according to which NBB acts as the principal supervisor. Under the terms of this protocol, SWIFT’s oversight focuses primarily on security, operational reliability, business continuity and the strength of SWIFT’s infrastructure.

History of SWIFT

Under the leadership of its inaugural CEO, Carl Reuterskiöld (1973-1989), SWIFT was founded in Brussels in 1973  and was supported by 239 banks in fifteen countries. It began to establish common standards for financial transactions and a shared data processing system and a global communications network designed by Logica and developed by Burroughs Corporation.

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Fundamental operating procedures, liability rules, etc., were established in 1975 and the first message was sent in 1977. The first SWIFT US operations center was opened by Governor John N. Dalton of Virginia in 1979.

Standards

SWIFT has become the industry standard for the syntax of financial messages. Many well-known financial processing systems can read and process messages in SWIFT format, regardless of whether the message was transmitted through the SWIFT network.

SWIFT cooperates with international organizations to define standards for the format and content of messages. SWIFT is also the registration authority (RA) for the following ISO standards:

  • ISO 9362: 1994 Banking – Banking of telecommunication messages – Bank identification codes
  • ISO 13616: 2003 IBAN Registration
  • ISO 15022: 1999 Values: Scheme for messages (Dictionary of data fields) (replaces ISO 7775)
  • ISO 20022-1: 2004 and ISO 20022-2: 2007 Financial services: message scheme of the universal financial industry
  • In RFC 3615 urn: swift: it was defined as uniform resource names (URN) for SWIFT FIN.

Operations centers

The SWIFT secure messaging network runs from three data centers, one in the United States, one in the Netherlands and one in Switzerland. These centers share information almost in real time. In case of a failure in one of the data centers, the other can handle the traffic of the entire network. To transmit its data, SWIFT uses submarine communications cables.

SWIFT opened the fourth data center in Switzerland, which began operations in 2009. Since then, the data of European SWIFT members are no longer reflected in the EE data center. UU Distributed architecture partitions send messages to two messaging zones: European and transatlantic.

Messages from the European zone are stored in the Netherlands and in a part of the Swiss operations center; The messages of the transatlantic zone are stored in the United States and in a part of the Swiss operations center that is separated from the messages of the European zone. Countries outside Europe were assigned by default to the transatlantic zone, but could choose to have their messages stored in the European zone.

Functions:

SWIFT does not facilitate the transfer of funds: rather, it sends payment orders, which must be resolved by the corresponding accounts that the institutions have with each other. SWIFT is a secure financial message provider; in other words, it transports messages from a bank to its recipient.

Its main function is to provide a secure transmission channel so that Bank A knows that its message to Bank B goes to Bank B and no one else. Bank B, in turn, knows that Bank A, and no one other than Bank A, sent, read or altered the message en route. Banks, of course, need to have checks in place before sending messages.

Significance of SWIFT:

Messages sent by SWIFT customers are authenticated through their specialized security and identification technology. Encryption is added as messages leave the client’s environment and enter the SWIFT environment. During the transmission process, the messages remain in the protected SWIFT environment, subject to all their confidentiality and integrity commitments, while they are transmitted to the operating centers (OPC) where they are processed, until they are sent securely to the recipient.

The world before SWIFT

Before SWIFT, Telex was the only available means of message confirmation for the international transfer of funds. The telex was hampered by low speed, security issues and a free message format; in other words, telex did not have a unified system of codes like SWIFT to name banks and describe transactions. Telex senders had to describe each transaction in sentences that were then interpreted and executed by the recipient. This led to many human errors.

To avoid these problems, the SWIFT system was formed in 1974. To operate a global network, seven major international banks formed a cooperative partnership that would transfer financial messages in a secure and timely manner.

Why is SWIFT dominant?

Three years after the introduction, SWIFT membership increased to 230 banks in five countries. Although there are other message services such as Fedwire, Ripple and CHIPS, SWIFT continues to maintain its dominant position in the market. Its success is attributed to the way it continually adds new message codes to transmit different financial transactions.

SWIFT now sends messages for a wide variety of actions, including security transactions and treasury transactions as it was primarily began with simple payment instructions.

Who uses SWIFT?

Initially, the founders of SWIFT designed the network to facilitate communication about the treasury and related transactions only. The robust design of the message format allowed for great scalability through which SWIFT gradually expanded to provide services to the following:

  • Banks
  • Brokerage institutes and houses of commerce
  • Stock traders
  • Asset management companies
  • Clearing houses
  • Deposits
  • Exchanges
  • Corporate Business Houses
  • Treasury market participants and service providers
  • Forex brokers and money
  • Within a SWIFT transaction

SWIFT is a messaging network that financial institutions use to transmit information and instructions securely through a standardized code system.

SWIFT assigns each financial organization a unique code that has eight characters or 11 characters. The code is called either the bank identifier code (BIC), the SWIFT code, the SWIFT ID or the ISO 9362 code. To understand how the code is assigned, let’s look at the Italian bank UniCredit Banca, based in Milan. It has the 8-character SWIFT code UNCRITMM.

The first four characters: the institute code (UNCR for UniCredit Banca)

The following two characters: the country code (IT for the country Italy)

The following two characters: the location / city code (MM for Milan)

The last three characters: optional, but organizations use it to assign codes to individual branches. (The branch of UniCredit Banca in Venice can use the code UNCRITMMZZZ).

Suppose a customer at a Bank of America branch in New York wants to send money to his friend who works at the UniCredit Banca branch in Venice. The New York customer can enter their Bank of America branch with their friend’s account number and the exclusive SWIFT code of UnicaCredit Banca for their Venice branch.

Bank of America will send a SWIFT message of payment transfer to the UniCredit Banca branch through the secure SWIFT network. Once Unicredit Banca receives the SWIFT message about the payment received, it will erase and credit the money to the Italian friend’s account.

As powerful as SWIFT is, keep in mind that it is just a messaging system: SWIFT does not own funds or securities, nor does it manage customer accounts.

Services offered by SWIFT 

The SWIFT system offers many services that help businesses and individuals complete accurate and trouble-free business transactions. Some of the services offered include:

  • Applications

The comparison of real-time instructions for treasury and forex transactions, the banking market infrastructure to process payment instructions between banks and the securities market infrastructure to process instructions for clearing and settlement of payments, securities, forex, and derivative transactions all these applications are being accessed by SWIFT connections.

  • Business intelligence

SWIFT has recently introduced dashboards and reporting utilities that allow customers to obtain a dynamic real-time view of message monitoring, activity, business flow and reporting. Reports enable filtering according to region, country, message types and related parameters.

  • Compliance Services

Aimed at services related to financial crime compliance, SWIFT offers reports and services such as Know Your Customer (KYC), Sanctions and Anti-Money Laundering (AML).

  • Messaging, connectivity and software solutions

The core of the SWIFT business lies in providing a secure, reliable and scalable network for the smooth movement of messages. SWIFT offers multiple products and services that allow its final customers to send and receive transactional messages through its various messaging, software and network connections centers.

How does SWIFT make money? 

SWIFT is a cooperative society. It is owned by its members and members are classified into classes based on share ownership. All members pay a one-time registration fee plus annual support charges that vary by member’s class.

SWIFT also charges users for each message according to the type and length of the message. These charges also vary according to the volume of use of the bank; There are different charge levels for banks that generate different volumes of messages.

In addition, SWIFT has launched additional services such as business intelligence, reference data and compliance services and offer other sources of income for SWIFT which are backed by the long history of data maintained by SWIFT.

Challenges for SWIFT

Most SWIFT clients have huge transaction volumes for which manual input of instructions is not practical. The need for automation for the creation, processing and transmission of SWIFT messages is growing. However, this has a cost and operating expenses.

Although SWIFT has been successful in providing software for it, that also comes at a cost. SWIFT may need to access these problem areas for the majority of its customer base. The automated solutions within this space can generate a new revenue stream for SWIFT and keep customers engaged in the long term.

The bottom line 

In the global processing of transactional messages, SWIFT has maintained its dominant position. He has recently ventured into other areas, such as providing information and data utilities for business intelligence, which indicates his willingness to remain innovative. In the short and medium term, SWIFT seems prepared to continue dominating the market.

The international cooperative of supervision of SWIFT

As principal supervisor, the Bank supervises SWIFT in cooperation with the other central banks of the G10 (ie the Bank of Canada, the Deutsche Bundesbank, the European Central Bank, the Bank of France, the Banca d’Italia, the Bank of Japan, Bank De Nederlandsche, Sveriges).

Riksbank, Swiss National Bank, Bank of England and the Federal Reserve System, represented by the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System).

The Bank monitors SWIFT’s developments on an ongoing basis. Identify the relevant problems through the analysis of the documents provided by SWIFT and through discussions with the administration.

It maintains an ongoing relationship with SWIFT, with periodic ad hoc meetings, and serves as the entry point for the central banks of the G10 for the cooperative supervision of SWIFT. In this capacity, the Bank chairs the superior groups of policies and technicians that facilitate cooperative supervision, provides the secretariat and supervises the follow-up of the decisions taken.

The various SWIFT supervisory groups are structured as follows:

– The SWIFT Cooperative Supervision Group (OG), made up of all the central banks of the G10, the ECB and the president of the CPMI, is the forum through which the central banks carry out the cooperative supervision of SWIFT and, in particular, , discuss the strategy and supervision policies related to SWIFT. .

– within the GO, the Executive Group (EG) holds discussions with the Board and the SWIFT management on the central bank supervision policy, the issues of interest, the SWIFT strategy with respect to the supervisory objectives and the conclusions.

The EG supports the Bank in the preparation of the discussions within the broader OG, and represents the OG in the discussions with SWIFT. The EG includes the Bank of Japan, the Federal Reserve Board, the Bank of England, the ECB and the Bank;

– at the technical level, the SWIFT Technical Supervision Group (TG) meets with the management, internal audit and SWIFT staff to carry out the basis of supervision. Specialized knowledge is needed to understand SWIFT’s use of information technology and the associated risks. The TG obtains its experience from the group of personnel available at the cooperating central banks. Reports its findings and recommendations to the OG.

The SWIFT Oversight Forum is composed of high-level supervisors of the central banks of the G10 (OG) and 10 additional central banks (ie the Reserve Bank of Australia, the People’s Bank of China, the Monetary Authority of Hong Kong, the Reserve Bank of India, the Bank of Korea, the Central Bank of Russia, the Monetary Agency of Saudi Arabia, the Monetary Authority of Singapore, the Reserve Bank of South Africa and the Central Bank of the Republic of Turkey) . Its objectives are:

– facilitate a coordinated flow of information on SWIFT supervisory findings to Forum participants;

– encourage discussions on the supervision policy regarding SWIFT;

– provide information to the OG about priorities in the supervision of SWIFT;

– Serve as a communication platform in interdependencies of the system related to the common use of SWIFT or for communication in case of important contingency situations related to SWIFT.

High Level Expectations (HLE) for (supervision of) SWIFT

  • IDENTIFICATION AND RISK MANAGEMENT

SWIFT is expected to identify and manage the operational and operational risks related to its critical services and ensure that its risk management processes are effective.

To help determine to what extent this expectation is met, supervisors review and SWIFT must provide timely access to all information they consider relevant with respect to the following:

– the risk identification and management processes, the documentation of the risks identified, the controls implemented to manage those risks and the decisions taken to accept risks;

– the processes to review the previously accepted risks in light of the new information;

– SWIFT structures and processes configured to manage risks effectively;

– the extent to which SWIFT provides effective risk assessments and risk management processes through oversight of the board of directors and independent internal and external audits.

– the extent to which the internal audit:

  • adheres to the principles of a professional organization, such as the Institute of Internal Auditors, which governs the practice and conduct of the audit;
  • independently assesses the inherent risks, as well as the design and effectiveness of risk management processes and internal controls to mitigate risks;
  • clearly communicates its evaluations to the relevant members of the Board and has direct and immediate access to the chairman of the Board’s Audit and Finance Committee.

– how risks are monitored and managed in several domains, including at least the following:

  • dependence on third parties;
  • legal and regulatory requirements related to the organization and corporate conduct of SWIFT;
  • relationships with customers;
  • Strategic decisions with impact on the long-term continuity of the critical service.

INFORMATION SECURITY

SWIFT  is expected to implement appropriate policies and procedures, and devote sufficient resources to ensure the confidentiality and completability of information and the availability of its critical services.

To help determine to what extent this expectation is met, supervisors review and SWIFT must provide timely access to all information they consider relevant with respect to the following:

– information security policy or framework, and any process and procedure to monitor compliance;

– capacity planning;

– change management practices;

– Evaluation of the implications of changes in SWIFT operations in information security.

  • RELIABILITY AND RESILIENCE

COMMUNICATED WITH ITS ROLE IN THE GLOBAL FINANCIAL SYSTEM, SWIFT IS EXPECTED TO IMPLEMENT ADEQUATE POLICIES AND PROCEDURES, AND DEVOTATION OF SUFFICIENT RESOURCES, TO ENSURE THAT YOUR CRITICAL SERVICES ARE AVAILABLE, RELIABLE AND RESILIENT AND THAT THE CONTINUATION OF THE COMPANY AND THE PLANNING OF DISASTER CONTINUATION AND THE RESTORATION OF DISASTERS IN THE EXAMINATION

To help determine to what extent this expectation is met, supervisors review and SWIFT must provide timely access to all information they consider relevant with respect to the following:

– objectives, strategies and business continuity and disaster recovery plans, including the extent to which they address the risk of major operational disruption;

– Plans, procedures and results of business continuity and disaster testing, including the extent to which SWIFT facilitates periodic testing with customers.

– Procedures and processes to register, report and analyze all operational incidents.

  • Technology planning

SWIFT is expected to have robust methods in its place to plan all the useful life of the use of technologies and the selection of technological standards.

To help determine to what extent this expectation is met, supervisors review and SWIFT must provide timely access to all information they consider relevant with respect to the following:

– Plans and strategic IT processes to maintain and update these plans.

– the extent to which technological decisions balance the short-term needs of individual service improvements with the long-term technological trajectory planned for the service;

– Maturity assessments of the technologies that are being evaluated for introduction into the SWIFT environment;

– Standard selection process when implementing and administering a service, and the process of reviewing and maintaining standards over time; Y

– processes to ensure that the design options consider information security risks for the user community.

  • COMMUNICATION WITH USERS

SWIFT IS EXPECTED TO BE TRANSPARENT FOR ITS USERS AND PROVIDE ENOUGH INFORMATION SO THAT USERS CAN UNDERSTAND WELL THEIR FUNCTION AND RESPONSIBILITIES IN THE MANAGEMENT OF THE RISKS RELATED TO THE USE OF SWIFT.

To help determine the extent to which this expectation is met, supervisors review, and SWIFT must provide timely access to all information they consider relevant with respect to the following:

– procedures and communication processes with the client to inform users of:

  • its role and responsibilities, including in case of interruptions of critical SWIFT services (crisis communication);
  • The management processes, controls and independent reviews of SWIFT of the effectiveness of these processes and controls;
  • identified weaknesses (absent or missing controls) if users need such information to manage the risks related to their use of SWIFT;

– the techniques that SWIFT uses to be informed by users of operational risks on the user’s side that could affect its own operations or, alternatively, the techniques that SWIFT uses to avoid any impact of that user on its operations;

– consultation mechanisms to ensure that SWIFT technology options that affect user operations are acceptable to the main users of critical services.

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