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Can someone familiar with the banking system chime in here? The announcements say that only selected banks are targeted. Won't they just funnel transactions th

Can someone familiar with the banking system chime in here? The announcements say that only selected banks are targeted. Won't they just funnel transactions through other Russian banks that are not banned? I also read that the previously announced sanctions on banks have lots of loopholes. Is that accurate? It all sounds a bit like punitive token measures rather than an actual hardline action. The central bank restrictions seem more impactful. I know nothing concrete was published yet, but how could they look like? Will they actually prevent Russia from liquidating their foreign currency reserves? Or can they also circumvent this by going through other countries like China?

rwaksmunski 5y ago
SWIFT disconnection is the WMD in the finance world. If you are American, imagine not being able to use ACH or checks anymore.
- coolestguy 5y ago
  >checks Unbelievable that this is how americans regularly use money
  - quesera 5y ago
    Payment by check is really not that common in US retail commerce. 2021 numbers from the Fed indicate 2% of in-person payments are via check, and I suspect that skews very heavily toward older customers. For comparison: 34% debit card, 31% credit card, 28% cash, 4% "other". https://www.frbsf.org/cash/publications/fed-notes/2021/may/2021-findings-from-the-diary-of-consumer-payment-choice/ https://www.frbsf.org/cash/publications/fed-notes/2021/may/2...
  - DyslexicAtheist 5y ago
    France is heavily using them heavily too. Some people even pay their groceries with cheques.
- egao1980 5y ago
  Not really. SWIFT is just helps to make transaction fast. There are alternatives that include Russian and Chinese systems. And you can always use phone, fax, etc. Disconnecting Russia from SWIFT will a) create short term hiccup in transaction clearing, b) reduce SWIFT revenues c) force Russia to switch oil/gas contracts to rouble or yuan. This in the long run is not good for euro as a reserve currency and will hurt petrodollar.
RWejlgaard 5y ago
I work in the Fintech industry. I'm only a platform engineer so take this with a grain of salt. SWIFT works by giving banks a unique ID (SWIFT code) and transactions supply a swift code and an account number (IBAN). Removing a country involves removing any bank that happens to be in Russia. The system itself doesn't care where in the world you are.
- Rebelgecko 5y ago
  If I understand correctly, only some Russian banks are being removed from SWIFT, so OP wonders why can't they can't all just funnel transactions through the ones that are still connected (I guess it opens those banks up to being sanctioned too?)
  - mirntyfirty 5y ago
    Perhaps it serves as a stern warning and demonstrates the willingness to go all the way down that road???
  - ncallaway 5y ago
    Imagine it’ll be a bit of a cat and mouse game. But it’ll be easy for these countries to observe when the volume of a particular bank jumps significantly. When that happens, that bank will be added to the list. At some point, banks not on the list may not be willing to allow money to be passed through them (or they may restrict the flows to a very small amount). It’ll be a game of cat and mouse now
psychlops 5y ago
I did AML for wire transfers in SWIFT. Not an expert, but can confirm that they can route it as you describe. Presumably, they will ban more banks and the whack-a-mole game begins. At least when I did it (15 years ago) there are also tricks like removing from the wire the originator details or where it passed through. Nobody really cares as long as the money gets to where it was supposed to go. There may be new rules in place, but I assume there are more loopholes as well.
- jacquesm 5y ago
  True, but the amounts involved here will make it show up quite quickly as the number of open routes is reduced.
einrealist 5y ago
Yes, there are loopholes by just not using Swift, like other networks or other means of communication. Depends on the processes between the banks that need to transfer assets. But there are also the sanctions. Any non-sanctioned bank still has a clearing process which involves checks for sanctions. So unless some bank wants problems with the EU or US, they might just deny settlements, even when Swift wasn't involved. Swift is more like a PR stunt or at least a technicality. Everyone just shouted "Swift" for days without having knowledge about it. The Central Bank sanction is more important here. This will cause the Ruble to go down and a run on the banks. Inflation will go up. And it will be harder to stabilize RU financial markets (like the stock market).

rwaksmunski 5y ago

SWIFT disconnection is the WMD in the finance world. If you are American, imagine not being able to use ACH or checks anymore.

coolestguy 5y ago
>checks Unbelievable that this is how americans regularly use money
- quesera 5y ago
  Payment by check is really not that common in US retail commerce. 2021 numbers from the Fed indicate 2% of in-person payments are via check, and I suspect that skews very heavily toward older customers. For comparison: 34% debit card, 31% credit card, 28% cash, 4% "other". https://www.frbsf.org/cash/publications/fed-notes/2021/may/2021-findings-from-the-diary-of-consumer-payment-choice/ https://www.frbsf.org/cash/publications/fed-notes/2021/may/2...
- DyslexicAtheist 5y ago
  France is heavily using them heavily too. Some people even pay their groceries with cheques.
egao1980 5y ago
Not really. SWIFT is just helps to make transaction fast. There are alternatives that include Russian and Chinese systems. And you can always use phone, fax, etc. Disconnecting Russia from SWIFT will a) create short term hiccup in transaction clearing, b) reduce SWIFT revenues c) force Russia to switch oil/gas contracts to rouble or yuan. This in the long run is not good for euro as a reserve currency and will hurt petrodollar.

RWejlgaard 5y ago

I work in the Fintech industry. I'm only a platform engineer so take this with a grain of salt. SWIFT works by giving banks a unique ID (SWIFT code) and transactions supply a swift code and an account number (IBAN). Removing a country involves removing any bank that happens to be in Russia. The system itself doesn't care where in the world you are.

Rebelgecko 5y ago
If I understand correctly, only some Russian banks are being removed from SWIFT, so OP wonders why can't they can't all just funnel transactions through the ones that are still connected (I guess it opens those banks up to being sanctioned too?)
- mirntyfirty 5y ago
  Perhaps it serves as a stern warning and demonstrates the willingness to go all the way down that road???
- ncallaway 5y ago
  Imagine it’ll be a bit of a cat and mouse game. But it’ll be easy for these countries to observe when the volume of a particular bank jumps significantly. When that happens, that bank will be added to the list. At some point, banks not on the list may not be willing to allow money to be passed through them (or they may restrict the flows to a very small amount). It’ll be a game of cat and mouse now

psychlops 5y ago

I did AML for wire transfers in SWIFT. Not an expert, but can confirm that they can route it as you describe. Presumably, they will ban more banks and the whack-a-mole game begins. At least when I did it (15 years ago) there are also tricks like removing from the wire the originator details or where it passed through. Nobody really cares as long as the money gets to where it was supposed to go. There may be new rules in place, but I assume there are more loopholes as well.

jacquesm 5y ago
True, but the amounts involved here will make it show up quite quickly as the number of open routes is reduced.

einrealist 5y ago

Yes, there are loopholes by just not using Swift, like other networks or other means of communication. Depends on the processes between the banks that need to transfer assets. But there are also the sanctions. Any non-sanctioned bank still has a clearing process which involves checks for sanctions. So unless some bank wants problems with the EU or US, they might just deny settlements, even when Swift wasn't involved. Swift is more like a PR stunt or at least a technicality. Everyone just shouted "Swift" for days without having knowledge about it. The Central Bank sanction is more important here. This will cause the Ruble to go down and a run on the banks. Inflation will go up. And it will be harder to stabilize RU financial markets (like the stock market).