SWIFT

THIS PPT IS MADE FOR BANK PROFESSIONALS AND BUSINESSMEN. SWIFTS OFFERINGS AND OTHER PARICIPANTS OF THE PROCESS HAS BEEN DISCUSSED . A DETAILED INSIGHT TO HOW THE SERVICE OFFERING HAS BEEN DESIGNED TO SUIT TODAYS COMPLEX TRADE RELATIONS.

What is it ?

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.

Banks use SWIFT to reach their counterparties, achieve operational cost efficiency, enhance their customer’s experience and improve liquidity risk management

According to Article 3 of its Articles of Association: "The object of the Company is for the collective benefit of the Members of the Company, the study, creation, utilization and operation of the means necessary for the telecommunication, transmission and routing of private, confidential and proprietary financial messages.

Who uses swift? Banks Trading Institutions Money Brokers Securities Broker Dealers Investment Management Institutions Clearing Systems and Central Depositories Recognized Exchanges Trust and Fiduciary Service Companies Subsidiary Providers of Custody and Nominees Treasury Counterparties Treasury ETC Service Providers High value trading clients who have overseas

business

THE USERS ARE CLASSIFED AS:

Members: have a number of shares in the capital of the Company, which shall be proportional to the usage of the message transmission services of the Company. (2,400 live members)

Sub-members: are organizations, at least 50 percent directly or 100 percent indirectly owned by a Member, with full management control. (3,342 live sub-members)

Participants: organizations that may be permitted to make use of specific services of the Company as Participant, not be entitled to shares in the capital of the Company. (4,569 live participants)

THE SWIFT PARTNERS Solution partners

Partner Solutions seeks to help achieve SWIFT customers end-to-end automation by SWIFT-enabling third-party software products, accredited SWIFT compliant applications, providers of SWIFT-related services and providing advice on finding potential solutions.

Service partnersSWIFT Service Partners are accredited to deliver consultancy services with SWIFT Certified Experts. Related with: SWIFT Software Implementations, SWIFTNet Connectivity Implementations, Upgrades of SWIFT software products & SWIFTNet connectivity, SWIFTNet Migration Assistance

Business partnersOver the years SWIFT has built a network of external partner companies who act in selected countries or regions on SWIFT's behalf, called SWIFT business partners. Related with: North America: S.I.D.E. America Corp, Middle East & Gulf Region: Eastern Networks Dubai, Balkan countries: CiS d.o.o. Serbia & Montenegro. Etc.

Network partnersSWIFT has adopted a multi-vendor model for its secure IP network (SIPN). The new architecture uses state-of-the-art security and ensures highest resilience and lowest risk. The key aspect of this architecture is the co-existence of multiple IP network partners. SWIFT uses four network partners, each with a standard offering of managed IP-VPN servicesRelated with: AT&T , BT Infonet etc.

Additionally SWIFTNet is SWIFT internet protocol (IP) based messaging platform. SWIFTNet offers four messaging services: SWIFTNet FIN SWIFTNet Interact SWIFTNet FileAct SWIFTNet Browse

SWIFT AND SANCTIONS SCREENINGSanctions: International sanctions are actions taken by countries

against others for political reasons, either unilaterally or multilaterally. Whenever a bank transmits a message it is important to check the content of the message to be assured that it is compliant as per Sanctions requirements. SWIFT’s systems are set up to verify this in an automated manner. It is an extremely important function within the whole system since any improper check may lead to Million dollar fines to be paid by the bank to the country involved in a particular transaction.

Diplomatic sanctions - the reduction or removal of diplomatic ties, such as embassies. Diplomatic sanctions are political measures taken to express disapproval or displeasure at a certain action through diplomatic and political means, rather than affecting economic or military relations. Measures include limitations or cancellations of high-level government visits or expelling or withdrawing diplomatic missions or staff

Military sanctions - Military sanctions can range from carefully targeted military strikes to degrade a nation's conventional or non-conventional capabilities, to the less aggressive form of an arms embargo to cut off supplies of arms or dual-use items.

Sport sanctions - preventing one country's people and teams from competing in international events

Sanctions on individuals: The United Nations Security Council can implement sanctions on political leaders or economic individuals. These persons usually find ways of evading their sanction because of political connections within their nation

Economic sanctions - typically a ban on trade, possibly Economic sanctions can vary from imposing import duties on goods from, or blocking the export of certain goods to the target country, to a full naval blockade of its ports in an effort to verify, and curb or block specified imported goods. Well known examples of economic sanctions include the United Nations sanctions against South Africa, United Nations sanctions against Zimbabwe, United Nations sanctions against Iraq (1990–2003) and the United States embargo against Cuba (1962–present). Since 1993 many countries have imposed trade sanctions on Burma (Myanmar). South Africa is the typical case study used for giving sanctions credibility, though that is a contentious claim itself. On May 13, 1998, the United States and Japan imposed economic sanctions on India, following its second round of nuclear tests. However, these have since been lifted. In 2001/2002, the United States imposed economic sanctions against the state of Zimbabwe, through the Zimbabwe Democracy and Economic Recovery Act of 2001 or ZDERA, S. 494, restricting access to financing, debt relief and rescheduling, forcing the government to operate on a cash only basis.

THE PROCESS SWIFTS are ensued from the customers request

to facilitate a transaction that may involve other banks and the customers trade counterparts. The bank takes customers request and screens it for content to make it is Sanctions compliant. Next it is sent to the correspondent bank an officer sitting at the other bank get the notification and completes the transaction by executing the transcript order through swift. Finally the first banks customer’s counterpart is contacted and the case is closed. The following is technical picture rep. of the process.

THE PROCESS

SWIFT SMOOTHENNING ALL ROUTES

Economic sanctions create challenges for financial institutions spreading globally and SWIFTS integrated process makes it possible to be assured of every transaction being compliant with Sanctions.

Over the years business around the world have required faster payments and multiple modification for a single transaction that both the parties could count upon, through SWIFT.

Each SWIFT message is a legitimate communication which also captures customer authorization. Banks have reduced physical maintenance of records to a large extent.

Services provided by swift

GPA: General Purpose Application, which only allows system messages, i.e.. messages from a user to SWIFT and vice versa, not from one user to another

FIN: Financial Application, which is the user to user service comprising, System Messages MT0nn, User to User Messages MT1nn through 9nn and Service Messages such as Acknowledgements Additionally, SWIFT provides a number of services that are charged for over and above the normal fees. In summary these are:

IFT : (Interbank File Transfer)For bulk file transfer of messages, for example low net value, high volume Retail payments

ACCORD: A centralised confirmation matching bureau service

Directory Services: An automated and centralised Standard Settlement Instruction service for message enrichment that at present is limited to Treasury and Payment information

RTGS (Y-copy): Mostly used for sending a copy of a message or parts thereof to a third party.

SWIFT ADDRESSA single bank may have a few hundred branches nationally and

many more internationally. Each day these banks may communicate countless times with its branches or different bank branches located at different corner of the world. To make these messages reach the right bank officer at the right bank branch and location the most important component is SWIFT ADDRESS.

SWIFT addresses are used to not only indicate the final destination of the message but to also identify parties within the individual message. It is the use of strictly codified addresses that enables the automation of Straight Through Processing in conjunction with the fixed tag format of the messages themselves. The term "SWIFT address" actually only relates to a subset of Business (formerly “Bank”) Identifier Codes (BICs), in other words you do not have to be a user of the SWIFT network to have a BIC and these can therefore be used over other networks such as Telex. The BIC is an ISO standard, ISO9362, and SWIFT is the recognised ISO (International Standards Organisation) body for assigning these.

The following shows the general format of a BIC address.

AAAA BB CC (D) (EEE) Bank Country Location LT Branch The first four characters represent the Bank code, for example NWBK

(NatWest), DEUT (Deutsche Bank). The next two characters represent the ISO Country code, for example GB

(United Kingdom), DE (Germany). The next two characters are the location code with some larger financial

centres such as London and New York having more than one, 2L and 22, 33 and 3N respectively.

These characters, the first 8 (commonly referred to as BIC-8), represent the mandatory portions and commonly within the body of a message this will be the normal format, for example NWBKGB2L (NatWest London), DEUTDEFF (Deutsche Bank Frankfurt).

The presence of 0 (zero) in position 8 indicates that this is a test & training address. Test & Training is a facility provided by SWIFT to give its users to test new releases without interfering with live operations. When an organisation first joins SWIFT they must spend two months sending messages in test & training before they are allowed to go live. SWIFT monitors this!

Optionally a three character branch code can be added at the end of the address. The BIC-8 plus the branch code is commonly referred to as the BIC-11. For example NWBKGB2BIR might be the Birmingham branch. These codes are primarily used for internal routing purposes within the bank, as the branches themselves do not have direct connection. Usage is often more common in some countries than others such as the heavy use by Italian banks.

THE MESSAGE TYPESSWIFT messages are identified in a consistent manner. They

all start with the literal "MT" which denotes Message Type. A 3-digit number then follows this. The first digit represents the Category. A category denotes messages grouped together because they all relate to particular financial instruments or services. The full list is as follows:MT0nn System Messages

MT1nn Customer Payments

MT2nn Financial Institution Transfers

MT3nn FX, Money Market & Derivatives

MT4nn Collections and cash letters

MT5nn Securities Markets

MT6nn Precious Metals & Syndications

MT7nn Documentary Credits & Guarantees

MT8nn Travellers Cheques

MT9nn Cash Management & Customer Status

MTn99 Free format

MT299 Free format relating to transfers

MT599 Free format relating to securities

MT999 General free format

MTn90 Advice of charges, interest, etc

MTn91 Request for Payment of Charges, etc

MTn92 Request for Cancellation

MTn93 Directory Services

MTn95 Query

MTn96 Answer

MTn98 Proprietary Message Envelop

SWIFT WORLDWIDE VOLUMES

THE END