| Type | Cooperative |
|---|---|
| Industry | Telecommunications |
| Founded | 1973 |
| Headquarters | Brussels, Belgium |
| Products | Financial Telecommunication |
| Employees | > 2000 |
| Website | SWIFT.com |
The Society for Worldwide Interbank Financial Telecommunication ("SWIFT") operates a worldwide financial messaging network which exchanges messages between banks and other financial institutions. SWIFT also markets software and services to financial institutions, much of it for use on the SWIFTNet Network, and ISO 9362 bank identifier codes (BICs) are popularly known as "SWIFT codes".
The majority of international interbank messages use the SWIFT network. As of September 2010[update], SWIFT linked more than 9,000 financial institutions in 209 countries and territories, who were exchanging an average of over 15 million messages per day (compared to an average of 2.4 million daily messages in 1995).[1] SWIFT transports financial messages in a highly secure way, but does not hold accounts for its members and does not perform any form of clearing or settlement.
SWIFT does not facilitate funds transfer, rather, it sends payment orders, which must be settled via correspondent accounts that the institutions have with each other. Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features.
SWIFT is a cooperative society under Belgian law and it is owned by its member financial institutions. SWIFT has offices around the world. SWIFT headquarters, designed by Ricardo Bofill Taller de Arquitectura are located in La Hulpe, Belgium, near Brussels.
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It was founded in Brussels in 1973, supported by 239 banks in 15 countries. It started to establish common standards for financial transactions and a shared data processing system and worldwide communications network. Fundamental operating procedures, rules for liability, etc., were established in 1975 and the first message was sent in 1977.
SWIFT has become the industry standard for syntax in financial messages. Messages formatted to SWIFT standards can be read by, and processed by, many well known financial processing systems, whether or not the message actually traveled over the SWIFT network. SWIFT cooperates with international organizations for defining standards for message format and content. SWIFT is also registration authority (RA) for the following ISO standards:[2]
In RFC 3615 urn:swift: was defined as Uniform Resource Names (URNs) for SWIFT FIN.[3]
The SWIFT secure messaging network is run out of two redundant data centers, one in the United States and one in the Netherlands. These centers share information in near real-time. In case of a failure in one of the data centers, the other is able to handle the traffic of the complete network. Currently, SWIFT has opened a third data center in Switzerland, which started operating in 2009.[4] Since then data from European SWIFT members will no longer be mirrored to the US data center. Also called Distributed Architecture will partition messaging into two zones, the European messaging zone and the Trans-Atlantic messaging zone.[5] European Zone messages are stored in the Netherlands and in a part of the Switzerland operating center, Trans-Atlantic Zone messages are stored in the US and in a part of the Switzerland operating center that is segregated from the European Zone messages. Countries outside of Europe were by default allocated to the Trans-Atlantic Zone but could choose to have their messages stored in the European Zone.
SWIFT moved to its current IP Network infrastructure, known as SWIFTNet, from 2001 to 2005,[6] providing a total replacement of the previous X.25 infrastructure. The process involved the development of new protocols that facilitate efficient messaging, using existing and new message standards. The adopted technology chosen to develop the protocols was XML, where it now provides a wrapper around all messages legacy or contemporary. The communication protocols can be broken down into:
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SWIFT provides a centralized store-and-forward mechanism, with some transaction management. For bank A to send a message to bank B with a copy or authorization with institution C, it formats the message according to standard, and securely sends it to SWIFT. SWIFT guarantees its secure and reliable delivery to B after the appropriate action by C. SWIFT guarantees are based primarily on high redundancy of hardware, software, and people.
During 2007 and 2008, the entire SWIFT Network migrated its infrastructure to a new protocol called SWIFT Phase 2. The main difference between Phase 2 and the former arrangement is that Phase 2 requires banks connecting to the network to use a Relationship Management Application (RMA) instead of the former Bilateral key exchange (BKE) system. According to SWIFT's public information database on the subject, RMA software should eventually prove more secure and easier to keep up-to-date; however, converting to the RMA system also meant that thousands of banks around the world had to update their international payments systems in order to comply with the new standards. RMA completely replaced BKE since January 1, 2009.
SWIFT actually means several things in the financial world:
Under 3) above, SWIFT provides turn-key solutions for members, consisting of linkage clients to facilitate connectivity to the SWIFT network and CBTs or 'computer based terminals' which members use to manage the delivery and receipt of their messages. Some of the more well-known interfaces and CBTs provided to their members are:
There are four key areas that SWIFT services fall under within the Financial marketplace, Securities, Treasury & Derivatives, Trade Services and Payments & Cash Management.
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SWIFT also offer a secure person-to-person messaging service, SWIFTNet Mail, which went live on 16 May 2007.[7] SWIFT clients can configure their existing email infrastructure to pass email messages through the highly secure and reliable SWIFTNet network instead of the open Internet. SWIFTNet Mail is intended for the secure transfer of sensitive business documents, such as invoices, contracts and signatories, and is designed to replace existing telex and courier services, as well as the transmission of security-sensitive data over the open Internet. Eight financial institutions, including HSBC, FirstRand Bank, Clearstream, DnB NOR, Nedbank, Standard Bank of South Africa and Bear Stearns, as well as SWIFT piloted the service.[8]
A series of articles published on June 23, 2006, by The New York Times, The Wall Street Journal and The Los Angeles Times revealed that the US Treasury Department and the CIA, United States government agencies, had a program to access the SWIFT transaction database after the September 11th attacks called the Terrorist Finance Tracking Program.[9]
After these articles, SWIFT quickly came under pressure for compromising the data privacy of its customers by letting a foreign government agency access sensitive personal data. In September 2006, the Belgian government declared that the SWIFT dealings with U.S. government authorities were, in fact, a breach of Belgian and European privacy laws.
In response, SWIFT is in the process of improving its architecture to satisfy member privacy concerns by implementing the new Distributed Architecture with a two-zone model for storing messages (see Operations centers).
Concurrent to this process, the European Union negotiated an agreement with the United States Government to permit the transfer of intra-EU SWIFT transaction information to the United States under certain circumstances. Due to concerns about its potential contents, the European Parliament adopted a position statement in September 2009, demanding to see the full text of the agreement, and requesting that it be fully compliant with EU privacy legislation, with appropriate oversight mechanisms in place to ensure that all data requests were handled appropriately.[10] An interim agreement was signed without European Parliamentary approval by the European Council on November 30, 2009,[11] the day before the Lisbon Treaty—which would have prohibited such an agreement from being signed under the terms of the Codecision procedure—formally came into effect. While the interim agreement was scheduled to come into effect on January 1, 2010, the text of the agreement was classified as "EU Restricted" until translations could be provided in all EU languages, and is due to be published on January 25, 2010.
On February 11, 2010, the European Parliament decided to reject the interim agreement between the EU and the USA with 378 to 196 votes.[12][13] One week earlier, the parliament's civil liberties committee already rejected the deal, citing legal reservations.[14]
In March 2011, it was reported that two mechanisms of data protection had failed: EUROPOL released a report complaining that American requests for information had been too vague (making it impossible to make judgements on validity),[15] and that the guaranteed right for European citizens to know whether their information had been accessed by American authorities had not been put in to practice.[15]