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
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