Financial Times ( FT ) :- Swift shows impact of Iran dispute on international business

Link

The Europe-US-Iran issue is existential for Swift as a global network

These could include asset freezes and US travel bans for the individuals, and restrictions on banks’ ability to do business in the US.

Swift’s very survival as a worldwide system for facilitating cross-border payments depends on it resisting such attempts to “weaponise” it for political ends, said Nicolas Véron, senior fellow at the Peterson Institute for International Economics.

“The Europe-US-Iran issue is existential for Swift as a global network,” he said of the action against the company, which is owned by about 2,400 banks and other financial institutions.

Born in the 1970s out of leading banks’ desire to replace clunky Telex messages with a more reliable and faster payment system, Swift is now part of the world’s financial plumbing. Its 11,000-strong network of users expects the pipes to stretch as far and wide as possible.

The company runs a gigantic secure messaging service for the world’s financial institutions, transmitting payment requests across its electronic platform and keeping a record of such communications on servers in Europe and the US. It handles over 6bn messages a year.

Its role and dominance make Swift a very unusual company: a technology business that is systemically important for global commerce but that does not directly handle payments and whose turnover is a tiny fraction of that of a large bank. Its 25-member board of directors resembles a United Nations of executives specialised in the more prosaic side of banking: experts in payments processing, trade finance and interbank relations.

The Iran deal fallout is part of a post-millennium pattern of Swift becoming caught up in political fights. In 2006, EU lawmakers were outraged by revelations of a secret “Terrorist Finance Tracking Programme” that allowed investigators to tap Swift data held on a server in the US.

The company was also at the centre of international tensions in 2012, when it was ordered by the EU — following a US initiative — to disconnect from Iranian banks that were the subject of sanctions. These measures were later suspended in 2016 after the nuclear deal came into effect.

But Swift has fought back publicly against the idea that access to its services should be used to punish or reward governments.

The rows showed how it has become a sensitive asset: a gateway to the global finance system that comes under Belgian and European oversight but which has become of great interest to US authorities.

Swift’s global role is highlighted by its purpose-built headquarters, set amid manicured lawns and a miniature forest where deer and pheasants roam.

The neoclassical building houses just under 1,000 employees from about 50 countries and is the base for Swift’s central management. This is where internal cyber security and physical security experts duel: “red” teams probe for weaknesses in the system against “blue” opponents whose job is to defend its integrity.

The data centres themselves are in the Netherlands and the US state of Virginia, with a back-up in Switzerland. There are also emergency recovery sites whose location Swift does not disclose.

The National Bank of Belgium noted in a report last year that Swift’s activities have “been recognised as a significant factor in the safety and efficiency of payment and securities settlement systems” across the world.

About 90 per cent of Swift’s complex is out of bounds to visitors for security reasons, with some areas secured by code-operated doors. Even one of the architects from the Barcelona-based firm that designed the complex once had trouble getting in for a visit. Swift wants to keep both its customer data and intellectual property from prying eyes, with developers working on areas such as machine learning and data management.

While the company describes itself as a “neutral utility with a global systemic character,” insiders say its offices bear more resemblance to those of a tech firm, with an open-plan layout, a hot desk environment, little visible paperwork and few desk phones.

Swift has kept a low profile so far on the Iran sanctions, but a spokesperson told the FT that it would “naturally be consulting with and seeking clarification from both EU and US authorities”., adding: “Our mission remains to be a global and neutral service provider to the financial industry.”

The question is whether Swift can achieve both goals at the same time. A financial information network can either be “global with political neutrality, or not politically neutral and fragmented”, said Mr Véron. Politicisation and global reach “are mutually incompatible”.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s