SWIFT- Messaging System

SWIFT is a messaging network used by banks and financial institutions globally for quick and faultless exchange of information pertaining to financial transactions.

What is SWIFT?

It is formally known as the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
It is a trusted messaging system for banks and other financial institutions around the world.
It doesn’t settle any money itself, but provides instruction messages for just how to give and receive specific funds.
It is control by the central banks of the G10 countries, the European Central Bank, and the National Bank of Belgium.

How does SWIFT work?

An important component of the SWIFT messaging system is the SWIFT code.
- Each bank that participates in the system is assign this code, which identifies the bank, the country it’s in, where it’s located in the country, and, optionally, the branch.
- It has the eight-character SWIFT code UNCRITMM.
  - First four characters: the institute code (UNCR for UniCredit Banca)
  - Next two characters: the country code (IT for the country Italy)
  - Next two characters: the location/city code (MM for Milan)
  - Last three characters: optional, but organizations use them to assign codes to individual branches.
- When a bank is a member of SWIFT, their instruction messages are clear as secure immediately, so the transactions happen quickly.

How is the organization governed?

SWIFT claims to be neutral. Its shareholders, consisting of 3,500 firms across the globe, elect the 25-member board, which is responsible for oversight and management of the company.
It is regulated by G-10 central banks from Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, the UK, the US, Switzerland, and Sweden, alongside the European Central Bank.
Its lead overseer is the National Bank of Belgium.
The SWIFT oversight forum was established in 2012.
The G-10 participants were join by the central banks of India, Australia, Russia, South Korea, Saudi Arabia, Singapore, South Africa, the Republic of Turkey, and the People’s Republic of China.
Europe, Middle East, and Africa are highest contributors to SWIFT.

What are the regulations made in SWIFT?

SWIFT established the customer security programme (CSP) in early 2016 to support customers in the fight against a growing cyber threat.

SWIFT published a detailed description of the mandatory and advisory customer security controls and made it critical customers prioritise the security network.
This framework describes a set of controls for its customers to implement on their local infrastructure.

What is India’s stand in this regard?

After the fraud, PNB adopted strict SWIFT controls, it has also created a separate unit to reauthorize most messages sent over SWIFT by branches.
Many other banks are expect to fast-track the integration between SWIFT and their backend systems.
To strengthen internal controls, the RBI has set April 30 as an “outer limit” for all public sector banks to integrate SWIFT with core banking solutions.
Indian banks need to adopt the best practices to protect end-to-end transaction ecosystem within their firms, including payments, securities trade and treasury.

SWIFT- Messaging System,SWIFT- Messaging System