Update from SWIFT Confab

Latest on sanctions, new focus on regulation and new products like Alliance Lite2.

Addressing recent moves to impose international sanctions on Iran, SWIFT’s CEO Lazaro Campos said that “the moment the wording is clear” on the European Union legislation now being drafted, the secure global financial messaging network will cut off that country’s central bank and other financial institutions. “We will disconnect and not wait for the approvals,” Campos told the 400 attendees at the annual SWIFT Operations Forum Americas held this week in New York City.

“No one wants to be in the middle of a political discussion,” Campos acknowledged to the session moderator, NPR’s David Brancaccio. "We want to work with every community," Campos said. The Belgium-based messaging network that is integral in enabling financial institutions to move vast amounts of money around the world was named recently in legislation both in Europe and the U.S. “The U.S and Europe are not that far apart. They want the same outcome,” Campos said.

Moving on to other topics, Campos spoke about how the cooperative has changed since 2007, “We were in denial,” he said of the financial industry’s immediate post-financial crisis state. Now the operative word is “transformation, and in that transformation we really do not know where we are heading, so we need to be prepared for a world that is changing every day.”

What Swift and other organizations have done is “become more agile—you become more efficient, you prepare for many more scenarios that you were not prepared to tackle in the past. You basically become more nimble, and it is not simple to become nimble in 210 countries,” he said.

So far, things have worked out well enough. “The last two years have been the best two operational years we have ever had at SWIFT,” he said. “We have increased our efficiency by 30%, reduced cost 20%, and 10% of the savings we have to invest in the future.”

Nonetheless Campos says that while the world is four years into the recovery, the process has five years more to go. “But even in the slow economy, there is still opportunity to gain market share, to do business,” he said. “Not much is going to change in the next few years. We need to get on with it.”

Part of SWIFT’s getting on with it is facing up to regulation. “We used to stay away from regulation and only talked about it in the implementation phase. I think the main difference now with regulation is that some of you may want us to be involved in it earlier,” he said. “There are 400-some pieces of regulation, 90-some have been discussed, and 300 are yet to come. The operational impact of this is enormous, and that has a significant impact on your business and whether you will be able to operate. I think that it’s imperative that we make sure regulation can be implemented in a way that is efficient. That is the difference in the Wall Street now and the Wall Street before. We are going to be involved when the content is discussed.”

The focus on regulation and government sanctions to promote foreign policy and fight financial crime has actually turned into a new product area. Sanctions Screening over SWIFT, which launches in April, provides smaller financial institutions with a centralized service to filter messages through selected sanctions lists from 16 jurisdictions to identify non-compliant messages. The service also provides updated lists.

On the corporate side, the news is the launch of a pilot version of Alliance Lite2 on April 16. The Lite2 product is a cloud service and allows companies to send up to 2,000 messages a day, compared with the 4,000-message limit for an entire month with Lite 1. “It’s a major paradigm shift,” said Ed Adams, regional director of SWIFT, adding that the Lite2 product allows companies to use SWIFT’s entire message set, whereas Lite 1 was much more limited. Lite2 will appeal to a much broader segment of corporations. About 500 are currently on Lite 1, and “there is no sunset date for Alliance Lite 1,” Adams said. Lite2 is set to go live in July.

Meanwhile, progress continues on SWIFT’s involvement with electronic banking account management (eBAM) and SWIFT Secure Signature 3SKey, another conference session revealed. Much work needs still to be done on standards, said Stacy Rosenthal, commercial manager of initiatives for SWIFT Americas, while Glen Solimine of J.P. Morgan pointed out that eBAM is now an industry movement and “it’s going to take banks, vendors and corporations working together to make it a reality.”

A working group is currently under way to look at the regulatory issues involved in getting 3SKkey approved for use in various countries and jurisdictions, Rosenthal said. SWIFT’s Central Utility project to ensure that eBAM standards are uniform actually wrapped up in January “because everyone was so enthusiastic about it,” Rosenthal said, when it was only supposed to run eight weeks. “And now actually we’re working together with the industry to build a business case,” she added.


For more on sanctions, see SWIFT May Expel Iran Central Bank.  And for a look at SWIFT’s central utility,
Shaping EBAM Standards.



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