I misrepresented a key issue with the discussions on the future of SWIFT in my blog entry last Friday, so thought I would write a follow up here, as it is THE key issue the network community faces.
Who owns SWIFT?
The obvious answer is the 9,700 banks who form the SWIFT community, but that’s not the answer.
Maybe it’s the few banks who most influence SWIFT that comprise the global transaction banks, but that’s not the answer either.
Maybe it’s the executive board and non-executives who comprise the corporate governance of SWIFT, but that’s also not the answer.
The answer is the lawmakers.
The lawmakers hit SWIFT where it hurts, in the legalities.
This was demonstrated by the US subpoena for the Terrorist Finance Tracking Program (TFTP) I referenced up front in my write-up last week.
And it was demonstrated again by the ejection of the Iranian banks from the SWIFT network earlier this month.
I put it that this was down to a move of the United Nations, and SWIFT picked up on this rapidly to say, “no, it was not the United Nations, it was the European Union.”
The official position regarding what happened is that SWIFT were forced to act by a decision of the European Council of the EU (member states), which prohibits provision of financial messaging services to the EU-sanctioned Iranian banks.
Because SWIFT is incorporated in Belgium, they have to comply with this new law and were instructed by the Belgian authorities to do so.
The action has no direct connection to the United Nations, USA or any other state outside the EU, but is all based on an EU decision which SWIFT had no choice about.
It is a complicated situation but I think it would be in SWIFT’s interest to behave as an instrument of the United Nations, rather than as the instrument of the USA, which is what the above demonstrates.
What the above demonstrates is that the US is learning how to control financial transactions globally in their war on the Middle East terror.
If Iran had been put before the United Nations for a vote, it is likely that the Chinese or Russians would have vetoed it. Because the United Western Nations – America and the European Union – work in unison, America can leverage influence over Europe to achieve their objectives without the issue of the Chinese or Russian veto.
That’s what the above move demonstrated – using American influence over the European authorities to get the Iranians ejected from SWIFT.
Now SWIFT has to act under the legality of where it operates, and that’s why the US could get a subpoena on the American office of SWIFT to gain access to transactions related to terrorism under TFTP in 2006 and why they could do the same through the Belgian authorities in 2012.
So here’s the rub: if the Chinese asked for the Nepalese banks to be taken off the SWIFT network, would the Belgian authorities respond in a similar fashion?
I’m not sure.
But a United Nations legal structure over SWIFT would be far more neutral than the bipartisan Western alliance that dominates today.
That's why I put it that way in last week's blog – trying to be fair – and maybe that’s something SWIFT will seek to address in the future to ensure a more global neutrality.
p.s. some tell me that the Foreign Account Tax Compliance Act (FATCA) is another such concern about US interference in financial transactions overseas.