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News: NATO has threatened to cut-off Russia from the international SWIFT payment network if Russia attempts to invade Ukraine.
What is Society for Worldwide Interbank Financial Telecommunications (SWIFT)?
It provides a network to send and receive instructions on international money transfers accurately and securely. It itself doesn’t hold any cash. The network is used by 11,000 financial institutions in 200 countries. Each week, transfer instructions for about $100 trillion are issued on SWIFT.
SWIFT has 3,500 shareholders who elect a 25-member governance board.
Russia and China are represented on the governance board, but India is not.
| Read here: 7 banks fined for delayed SWIFT implementation |
Why SWIFT is prone to cyber-terrorist attacks?
Using SWIFT as a tool of economic sanctions has resulted in the network itself becoming a target for cyberterrorist attacks. In 2016, Lazarus Group from North Korea infiltrated the network of Bangladesh Bank using malware, took control of Swift terminals within the bank and initiated transfers to multiple locations in the Philippines.
The same group also hacked the emails of Sony Pictures in retaliation for the release of the 2014 spoof called The Interview that portrayed North Korea in a bad light.
Why, Russia and China are building their own international payment system?
China launched China’s Cross-Border International Payment Systems (CIPS) in 2019.
In 2014, during the time when Russia annexed Crimea and was threatened of SWIFT sanctions, it launched a messaging system, the System for Transfer of Financial Messages (SPFS).
Both the countries are in advanced stages of linking the two systems and various countries like Turkey and India are willing to join the system.
Source: This post is based on the article “Denial of access to SWIFT is a blunt tool for geopolitics” published in Livemint on 15th February 2022.
