Denial of Access to SWIFT is a Blunt Tool for Geopolitics

Before 1973, when the SWIFT network was created, international money transfer instructions were exchanged by clunky telex machines. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) was launched as a massive messaging network to accurately and securely send and receive instructions on international money transfers. Today, the network is used by 11,000 financial institutions in 200 countries and members send messages about 50 million times a day. SWIFT holds neither securities nor cash; It provides messaging platform. About $100 trillion worth of transfer instructions are issued every week on SWIFT. To put this in perspective, the world’s economic output is expected to reach the same number in 2022.

Swift claims to be neutral. Its 3,500 shareholders elect a 25-member board of governance. Its principal regulator is the National Bank of Belgium. Russia and China are represented on the Board of Governance, but India is not. Iran’s banks’ access to SWIFT was revoked, despite protests from some European countries. North Korea’s banks were liquidated in 2014. The use of the SWIFT snap-off as a tool of economic sanctions has resulted in the network itself becoming a target of cyberterrorist attacks.

The SWIFT network was involved in one of the largest bank robberies in world history. In 2016, the Lazarus Group, a North Korean organization, initiated 35 transactions worth over $1 billion from Bangladesh Bank’s account held at the Federal Reserve Bank of New York (FRBNY). North Korean hackers infiltrated Bangladesh Bank’s network using malware tied to a fictitious candidate’s resume, took control of SWIFT terminals within the bank and began those transfers in several locations in the Philippines just before a long weekend. did. FRBNY allowed five transfers worth more than $150 million, but withheld the rest because a bank address on Jupiter Street in Manila was the name of an approved shipping line with connections to Iran. Of the total robbery, $81 million is yet to be recovered. The Lazarus Group is the same one that hacked Sony Pictures’ emails in retaliation for the release of a 2014 spoof called The Interview that portrayed North Korea in a bad light. The BBC podcast series ‘The Lazarus Heist’ is an entertaining listen that talks about this group of hackers and their adventures.

Since the West has apparently used SWIFT-denial as a threat, China and Russia are building their own international payment systems. China’s Cross-Border International Payment System (CIPS) was launched in 2019. In 2014, at the time Russia annexed Crimea and threatened deportation from SWIFT for the first time, it launched a messaging system, the System for Transfer of Financial Messages (SPFS). ) Russia and China are in the advanced stage of linking the two systems and several independent countries such as Turkey and India have indicated their willingness to join. The CIPS and SPFS do not have the depth or strength of SWIFT, but are efforts to build infrastructure designed for a world order where the US, China and Russia would have separate ‘spheres of influence’ and no global hegemony . In a recent war-game exercise held at the Harvard Kennedy School, bad actors stole $3 billion dollars by using SWIFT to push countries for acceptance of China’s new digital currency and avoid North Korea sanctions and was able to purchase materials for his nuclear discovery.

In order to mix metaphors, Swift herself would need to make rapid changes to survive. Block-chain technology promises faster, less expensive and more decentralized operations for a new global payments framework. Ultimately, however, Swift is not only a technical platform for the exchange of messages, it is also a set of rules and standards that its user-members have accepted for the greater good. When trust breaks down among members and it is ruled by humans, the network itself is put to the test, as we can see happening now. If governance is completely decentralized or subject to artificial intelligence, then that system is not only prone to hacks, but can also go rogue. North Korean hackers have hacked several cryptocurrency exchanges and stolen from their ‘hot wallets’ in recent years.

The conflict over the Swift Reach is symptomatic of the world’s search for an order different from the one prevailing since World War II. The collapse of the World Trade Organization’s (WTO) conflict resolution system, polarization in certain technology blocks, particularly those related to 5G telecommunications systems, and recent vaccine nationalism are further examples of tensions within the current world order.

The more brazenly the West breaks ‘rules’ to facilitate military or strategic purposes, the more it sows the seeds of other alternatives. US President Joseph Biden recently said that the US would not send troops and military hardware to Ukraine because “it is a world war if the Americans and Russians start firing at each other. As tanks roll in eastern Ukraine, Access control to the Swift is a child trigger on the bazooka that can fire from both sides.

PS: “Mastering others is strength, mastering yourself is true power,” said Lao Tzu.

Narayana Ramachandran is the chairman of Include Labs. Read Narayan’s mint column at www.livemint.com/avisiblehand