SWIFT Connect

The Society for Worldwide Interbank Financial Telecommunication (SWIFT), legally known as S.W.I.F.T, is a Belgian cooperative society offering services related to the execution of payments and financial transactions between banks worldwide. Its main purpose is to serve as a primary messaging network through which international payments are initiated. SWIFT also sells software and services to financial organisations, mostly for the use of its proprietary “SWIFTNet”, and assigns ISO 9362 Business Identifier Codes (BICs), known as “SWIFT codes.” The SWIFT messaging network is an element of the global payment system. It carries the “messages containing the payment instructions between financial institutions involved in a transaction. However, it doesn’t manage private or business accounts and doesn’t hold funds from third parties. SWIFT also doesn’t perform settlement or clearing functions. After a payment is initiated, it must be settled via a payment system like TARGET2 in Europe. For cross-border operations, this step often takes place through correspondent banking accounts that financial institutions have with each other. Approximately half of all high-value international payments worldwide are executed through the SWIFT network. The system links over 11,000 financial institutions in over 200 countries and territories and handles an average of 32 million daily messages. In 2018, SWIFT was heavily criticised for its inefficiency despite being widely used. The main problem was that payments frequently “passed through several banks before reaching their recipients, making them time-consuming and costly.” Transactions also lacked transparency on how much money will arrive at their destination. To solve the issue, SWIFT launched an improved service called “Global Payment Innovation” (GPI). According to numbers, the service was adopted by 165 banks and completed half its payments within 30 minutes. As a cooperative society under Belgian law, SWIFT is owned by its member financial institutions. It hosts Sibos, an annual conference specifically aimed at the financial services industry.

History of S.W.I.F.T. SC

SWIFT was established in Brussels, Belgium, on 3 May 1973. Swedish banker Carl Reuterskiöld was the organisation’s inaugural CEO, a position he held for a decade. At the time of its foundation, the cooperative society was supported by 239 banks in 15 countries. Before SWIFT, international financial operations were conducted over Telex, a public network involving manual message writing and reading. It was created out of fear of what might occur if a single private and fully American entity had complete control over global financial flows. Prior to the Telex, international transactions were executed through the First National City Bank (FNCB), later known as Citibank. In response to FNCB’s protocols, other European and American banking organisations pushed for an alternative messaging system to replace public providers and accelerate payment processes potentially. SWIFT established common standards for financial operations, a shared database, and a worldwide communications network designed by Logica and developed by the Burroughs Corporation. In addition, fundamental operational procedures and liability rules were introduced in 1975, and the first transaction was made in 1977. The network’s first international operations centre was based in Virginia, U.S.A., and was inaugurated by Governor John N. Dalton.

S.W.I.F.T SC Standards

SWIFT is currently the industry’s standard for syntax in financial messages. Operations formatted to SWIFT requirements can be processed and read by numerous prominent processing systems, regardless of whether or not the message travelled over the SWIFT network. SWIFT collaborated with international organisations to define requirements for message content and format. SWIFT is also Registration Authority (RA) for the following ISO standards:

• ISO 9362: 1994 Banking – Introduced Bank Identifier Codes (BIC);
• ISO 15022: 1999 Securities – Replaced ISO 7775 and introduced the scheme for messages (Data Field Dictionary);
• ISO 10383: 2003 Securities and related financial tools – Introduced codes for market identification (MIC) and exchanges;
• ISO 13616: 2003 IBAN Registry;
• ISO 20022-1: 2004 and ISO 2022-2: 2007 Financial services – Introduced the Universal Financial Industry message scheme.

In Request for Comments (RFC) 316 urn:swift: was defined as Uniform Resouce Names (URNs) for SWIFT FIN.

Operations Centres

The SWIFT secure messaging network is managed from three data centres based in the United States, Switzerland, and the Netherlands. These centres share information in near real-time. If one fails, the others can handle the traffic of the complete system. SWIFT transmits data by using submarine communication cables. Soon after opening its third operation centre in Switzerland in 2009, SWIFT launched new distributed architecture with two messaging zones – European and Trans-Atlantic. Meaning data from the European members no longer mirrored the U.S. data centre. European zone messages are stored in the Netherlands and a part of the Swiss centre. Trans-Atlantic messages are stored in the U.S. and another part of the Swiss centre, separated from the European zone messages. Countries outside of Europe are by default allocated to the Trans-Atlantic zone but can choose to have their messages stored in the European zone.

Data Centres

SN	SWIFT Data Centres	Type
1	Zoeterwoude, Netherlands	Operating Centre
2	Culpeper, Virginia, United States	Operating Centre
3	Diessenhofen, Switzerland	Operating Centre
4	Hong Kong	Command and Control

SWIFTNet Network

SWIFT moved to its current IP network infrastructure, SWIFTNET, from 2001 to 2005, and completely replaced its previous X.25 infrastructure. The process involved developing and deploying new protocols to ease efficient messaging using existing and novice message standards. The technology chosen to create the protocols was XML. It now provides a frame around all messages, contemporary or legacy. The communication protocols are categorised as

InterAct	FileAct	Browse
SWIFTNet InterAct Realtime	SWIFTNet FileAct Realtime	SWIFTNet Browse
SWIFTNet InterAct Store and Forward	SWIFTNet FileAct Store and Forward

Architecture

SWIFT offers a centralised store-and-forward mechanism, with a degree of transaction management. For banks to send messages concerning third parties to one another, they must format the messages per industry standards, and security send them to SWIFT. SWIFT ensures the reliable and safe delivery of messages. SWIFT guarantees are based mainly on high-redundancy software, hardware, and people.

SWIFTNet Phase 2

During 2007 and 2008, the entire SWIFT system moved its infrastructure to a new protocol called SWIFTNet Phase 2. The primary difference between both infrastructures is that Phase 2 requires banking institutions connected to the network to use a Relationship Management Application (RMA) instead of the former bilateral key exchange (BKE) system. According to SWIFT’s public information database, the RMA software is easier to keep updated and more secure. The main problem of the infrastructure migration was that thousands of banks worldwide had to update their international payment systems to abide by the new standards. RMA completely substituted BKE on 1 January 2009.

Products and Interfaces

SWIFT is synonymous with several things in the financial industry:

• A set of services and connection software enabling financial institutions to transmit messages over the SWIFT network;
• A set of syntax standards for financial messages;
• A secure network for transmitting messages between financial institutions;

Furthermore, SWIFT offers turn-key solutions for members, comprising of linkage clients to facilitate the connection to the SWIFT network. It also provides Computer-Base Terminals (CBTs), which members can use to manage the delivery and receipt of their financial messages. These are some of the more popular interfaces and CBTs offered to members:

• SWIFTNet Link (SNL) software installed on a SWIFT member’s website to open a direct connection to SWIFTNet.
• Alliance Gateway (SAG) software with interfaces enabling other software products to use SNL to connect to SWIFTNet.
• Alliance WebStation (SAB) desktop interface for the SWIFT Alliance Gateway. It has the following features:
  • Administrative access to SAG;
  • Browser connection to SWIFTNet for the use of additional services, like Target2;
  • Direct connection to SWIFTNet via SAG to administrate SWIFT Certificates;
• Alliance Workstation (SAW) is a desktop software for monitoring, FIN message creation, and administration. Since SAA cannot create MX messages, Alliance Messanger (SAM) is used instead.
• Alliance Messaging Hub (AMH) and Alliance Access (SAA) are SWIFT’s main messaging software applications. They allow message creation for FIN messages and routing and monitoring for MX and FIN messages. The primary interfaces are FTA and MQSA.
• Alliance Life2 is a secure, dependable, cloud-based method to connect to the SWIFT network. It’s a light version of Alliance Access that explicitly targets customers with a low traffic volume.
• Alliance Web Platform (AWP) is a new thin-client desktop interface offered as an alternative to SAB, SAW, and SAM.

Services

There are four key categories that SWIFT services fall under in the financial industry:

• Securities;
• Treasury & Derivatives;
• Cash Management;
• Trade Services;

These are the service packages related to the categories mentioned above:

SWIFTRef

SWIFT’s unique reference data utility service is known as SWIFTRef. It sources data directly from data originators, including banks, code issuers, and central banks. Its objective is to make it easy for originators and issuers to store data regularly and thoroughly. SWIFTRef constantly verifies and validates data across various data sets.

SWIFTNet Mail

SWIFTNet Mail is a secure person-to-person messaging service. It was launched on 16 May 2007 and allows users to configure their existing email infrastructure to send emails through the highly dependable and safe SWIFTNet network instead of the open Internet. It is intended to secure the transfer of sensitive business paperwork, like invoices, signatories, contracts, etc. SWIFTNet Mail is designed to replace courier and telex services. The messaging platform is backed but several prominent financial institutions, including HSBC, DnB NOR, Standard Bank of South Africa, Nedbank, Clearstream, and FirstRand Bank.