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After the Russian Federation invaded Ukraine in 2022, several Russian banks were banned from using SWIFT. According to Wikipedia, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), is a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide and owned by its member financial institutions. That sounds like a society privately owned by private companies. But the various news articles describing the ban of some Russian banks from SWIFT, or the call to ban all Russian banks from SWIFT, it sounds like a decision taken by EU and USA.

Who controls SWIFT? How does the governance work on questions such as sanctioning banks or entire countries? Can individual countries ban other countries from SWIFT, or (conversely) veto a ban on other countries from SWIFT?

On their own website, SWIFT writes that SWIFT is incorporated under Belgian law and has to comply with this decision as confirmed by its home country government, which sounds like Belgium theoretically has the sole power to exclude entire countries from SWIFT, but SWIFT also complies with sanctions imposed by the U.S. alone, which makes the situation unclear again.

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  • "...which makes the situation unclear again." Maybe the Belgian government told them to comply with US sanctions. Mar 29, 2022 at 8:43
  • @Trilarion maybe, but the EU at the time set up a system to try to circumvent those sanctions…
    – gerrit
    Mar 29, 2022 at 10:29
  • @gerrit it's possible that Belgium took that stance to save face. It's also possible that Belgium doesn't require SWIFT to comply but also cannot (or does not want to) prohibit SWIFT from complying. I share your interest in these questions but don't have time to investigate.
    – phoog
    Mar 29, 2022 at 11:16
  • "its home country government" - Belgium has 6 or 7 governments, depending on how you count it. "Who is in control?" is a recurring question in Belgium.
    – MSalters
    Mar 29, 2022 at 14:03
  • Just ask Iran about doing business without using the US banking networks, there's a reason that despite the disagreements with the sanctions, no European country corp thought of doing business with them after they went in place. Executives tend to prefer not being hauled off by FBI agents. For any business looking to do banking in the modern Western banking ecosystem, US sanctions are not a choice.
    – eps
    Mar 30, 2022 at 5:33

2 Answers 2

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Who controls SWIFT?

SWIFT is controlled by a board of directors which, pursuant to SWIFT's bylaws, comprises individuals ("physical person[s]") who must be "employee[s] of a Shareholder or of an organisation deemed related to a Shareholder by the Board of Directors."

How does the governance work on questions such as sanctioning banks or entire countries?

The board "may suspend or expel a shareholder" -- that is, a participating bank -- for several reasons, including being "subject to regulations impacting its shareholding in the Company."

In addition to complying with Belgian law because it is a Belgian company, SWIFT must contend, like any company with international operations, with the fact that it is exposed to legal action in other jurisdictions. Even if the US has no direct authority to instruct SWIFT to stop processing certain transactions or what have you, it still has the authority to seize the assets that SWIFT holds in the US in connection with its operations in Virginia (it also has data centers in Hong Kong, the Netherlands, and Switzerland), or to impose whatever other measures may be authorized by US sanctions laws, should SWIFT be found to have violated those laws. As with any company, SWIFT's board of directors has to weigh the probable consequences of complying with a ban or not.

Can individual countries ban other countries from SWIFT, or (conversely) veto a ban on other countries from SWIFT?

I don't know, but it looks like this isn't possible in general. If it were, surely smaller countries would be threatening to expel each other's banks, and some ally of Iran would have vetoed the expulsion of Iranian banks.

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    Possibly relevant quote at the end of this press release by SWIFT going back to the lifting of some sanctions when the JCPOA was agreed.
    – JJJ
    Mar 29, 2022 at 10:16
  • including being "subject to regulations impacting its shareholding in the Company." — so what actually happens when "EU and USA ban Russian banks from Swift", is that they pass (national or EU level) regulations that compel the board to suspend/expel those banks? The decision the board of directors takes when "banks are banned from SWIFT" is essentially to follow laws and regulations — which makes the de facto important decision the ban imposed by politics, and the freedom of the board of directors is very limited in practice? Could you expand a bit on this?
    – gerrit
    Mar 29, 2022 at 10:32
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    @gerrit yes, see for example article 5h in the latest version of Council Regulation (EU) No 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine. That regulation has been updated through subsequent regulations listed in that link.
    – JJJ
    Mar 29, 2022 at 10:42
  • @gerrit "Could you expand...?" This answer is intended to point out that "has to comply with this decision as confirmed by its home country government" does not imply that SWIFT must necessarily act as an agent of Belgium and that it does not imply that SWIFT is subject only to Belgian law. The reasoning is based on general principles of corporate governance and civil enforcement, but I unfortunately do not have time to investigate SWIFT's governance more specifically. It would indeed be interesting to know how much freedom the board has in various situations; perhaps someone else can answer.
    – phoog
    Mar 29, 2022 at 11:13
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Are you talking about: de facto control or de jure control?

If we talk about de jure control, it's a cooperative union headquartered in Belgium. Therefore, no country has exclusive control over it.

Regarding de facto control, it is controlled by the USA. The main reason being any SWIFT transaction goes through the US federal reserve system. And, the denomination is calculated on the basis of the USD.

On the other hand, we have to remember that the USA is the largest economy in the world along with the most powerful currency the USD, the most advanced tech sector, and giant corporations.

Therefore, the whole world is dependent on the US economy, and the USA has de facto control over the world financial system.

This is why countries like Iran cannot use SWIFT, and the EU is pushing the INSTEX as a parallel platform?

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  • Maybe start with who is in de jure control and then go on about the rest? Mar 29, 2022 at 8:42
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    "any SWIFT transaction goes through the US federal reserve system". I think that's only true for USD transactions. Mar 29, 2022 at 10:12
  • "Any SWIFT transaction goes through the US federal reserve system". That seems a bit imprecise, What does "goes through" even mean? There's also BiS (Bank of International Settlements) in Switzerland to consider. The EU has TARGET2, which is open to non-EU countries (in particular Switzerland). Instex is a special case for just Iran, it's not pushed as a SWIFT alternative.
    – MSalters
    Mar 29, 2022 at 14:13

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