In 'unprecedented' step, Swift cuts off Iranian banks

In 'unprecedented' step, Swift cuts off Iranian banks

Under orders from the EU, Swift has taken the unprecedented step of cutting off its financial messaging network to Iranian banks subject to European sanctions.

A new European Council decision prohibits entities such as Swift providing "specialised financial messaging services" to EU-sanctioned Iranian banks.

In a statement, the EU says: "The Council today developed the application of the EU's restrictive measures against Iran, which include asset freezes on persons and entities associated with Iran's nuclear activities. In this context, the Council agreed that no specialised financial messaging shall be provided to those persons and entities subject to an asset freeze."

The affected banks have been notified of the disconnection, which will become effective on Saturday.

Lázaro Campos, CEO, Swift, says: "This EU decision forces Swift to take action. Disconnecting banks is an extraordinary and unprecedented step for Swift. It is a direct result of international and multilateral action to intensify financial sanctions against Iran."

Previously, Swift had described any decision to turn off the tap to Iran as "a complex situation that needs to take into consideration the implications to the functioning of the global payments system as well as to the continued flow of humanitarian payments to the Iranian people".

Incorporated under Belgian law, the body has no choice but to now comply with the European decision as confirmed by its home country government, says the latest statement.

Europe and the US have been manoeuvring to tighten sanctions against Iran as part of a strategy to cut off the supply of funds for the country's nuclear energy programme.

In 2010, 19 Iranian banks and 25 Iranian entities reportedly used Swift more than two million times, transacting $35 billion in trade with Europe alone.

Last month US politicians proposed a bill that would block Iranian banks from using the Swift network. At the time Swift said that it complies with "all applicable sanctions laws of the multiple jurisdictions in which we operate".

David Cohen, treasury under secretary for terrorism and financial intelligence, has welcomed the latest development, saying: "Today's decision reflects the growing international consensus that substantially increased pressure is needed to convince the Iranian regime to address the international community's concerns about its illicit nuclear activities."

Comments: (8)

A Finextra member
A Finextra member 15 March, 2012, 16:12Be the first to give this comment the thumbs up 0 likes

I am as concerned as everyone about the Iranian situation but not sure that this move makes much sense. It will cause problems for plenty of people but not the Government. We should be doing more to talk 

A Finextra member
A Finextra member 15 March, 2012, 18:17Be the first to give this comment the thumbs up 0 likes

Shame on SWIFT.  I agree, an entire community of people will suffer because of a handful of a few.

Clearly the world can't rely and will never be sure on the SWIFT standard again.

Patricia Hines
Patricia Hines - Celent - Charlotte 16 March, 2012, 10:471 like 1 like

I don't think people should be blaming Swift The article states that the  European Council put in its orders some very specific language that seems targeted at Swift: "specialised financial messaging services". Swift is subject to the same laws as any other organization. If you feel that the action was unwise, blame the European Council. 

A Finextra member
A Finextra member 16 March, 2012, 11:191 like 1 like

Yes very much so. SWIFT did not have a choice

Mark Mixter
Mark Mixter - Open Text - Chicago 16 March, 2012, 13:281 like 1 like

As a leading member of not only the finanical but also the global community SWIFT must follow the rule of law - which they did in this case -follow.  A leader would have been willing to act w/o waiting for political cover.

A Finextra member
A Finextra member 17 March, 2012, 08:02Be the first to give this comment the thumbs up 0 likes

These comments are all true and valid but the FACT still remains that SWIFT failed the banking system whether it had a choice or not.  That statement is a truism.  SWIFT could have failed because of a system outage but in this case it failed from meeting its commercial objectives due to regulatory requirements, the FACT still stands that SWIFT failed.

“SWIFT are simply following the law, they didn't have a choice” however that is a sign that the world needs another choice other than SWIFT.  See this from thinking outside the box, the fact still remains SWIFT failed and we have an over dependence on the firm.

SWIFT at the end of the day will be the final straw of the chain of responsibility for making the lives of thousands of people miserable. Whether any of us like to accept this fact or not, it is a fact. We are all over reliant on SWIFT.

Clearly the world needs a solution greater SWIFT and this is a sign that the dependence on a single institution for this type of important messaging is something that has to be undone in the coming years ahead, we have found the flaws in SWIFT.

Finally it is very easy for all of you to imply the entire Iranian people are evil by simply hanging the righteous responsibility on SWIFT doing the right thing but then are you suffering from this outcome?

As an innocent bystander it is easy for all of you to judge neither SWITFT nor the law and it is better to accept that Iran must be severed from the globe of finance and that all Iranian people must be punished, perhaps SWIFT is fantastic way of achieving that end.  Like this statement or not, switch the tables on your thinking and imagine your world without a banking system.

Now I am sure there will be many of you out there that will see this commentary as unpleasant, may be even offensive but sometimes the truth is that, hard to stomach.

 

A Finextra member
A Finextra member 20 March, 2012, 10:31Be the first to give this comment the thumbs up 0 likes

SWIFT did have a choice... what would have happened if SWIFT refused, or challenged the decision? This is essentially political interference in a global infrastructure. It raises the use of SWIFT as a weapon in ongoing political disputes around the world - who is next after Iran? North Korea, Congo, Syria, Israel... there are any number of political disputes out there.

It will certainly make institutions in these politically sensitive countries think about alternatives.

A Finextra member
A Finextra member 20 March, 2012, 11:41Be the first to give this comment the thumbs up 0 likes

Remember SWIFT is a bank owned organisation and the Banks legally have to abide by sanctions. So SWIFT had no choice. Although i would prefer discussion rather than sanction i cant blame SWIFT for doing what they were told to do. The alternative is legal sanctions against SWIFT and possibly Banks

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