SWIFT- Society for Worldwide Interbank Financial Telecommunication
SWIFT MESSAGING SYSTEM
SWIFT NETWORK ALL OVER THEWORLD
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WHAT IS SWIFT AND SWIFT NETWORK ?
SWIFT- Society for Worldwide Interbank Financial Telecommunication
SWIFT is acronym for " Society for Worldwide Interbank Financial Telecommunication " . The society provides network for sending and receiving secured messages , especially of financial transactions , among the member banks and financial institutions . Network software provided is also popularly known as SWIFT , though it is officially called SWIFTNet .
The society is headquartered in Belgium and has membership of more than 11,000 financial institutions from 200 countries . SWIFT was started in Brussels in 1973 with initial membership of 239 banks in fifteen countries . Now it is grown in to such large network that no financial institution can carry on their international business without the network provided by SWIFT . Presently more than 25 million messages are exchanged daily among member banks . In India all banks having international business are members of this society .
It is managed as a co-operative society owned by all its members and governed by Belgium law . It has two data centres , one each in Unites states and Netherlands .
You can reach official website of the society by clicking here
The society is headquartered in Belgium and has membership of more than 11,000 financial institutions from 200 countries . SWIFT was started in Brussels in 1973 with initial membership of 239 banks in fifteen countries . Now it is grown in to such large network that no financial institution can carry on their international business without the network provided by SWIFT . Presently more than 25 million messages are exchanged daily among member banks . In India all banks having international business are members of this society .
It is managed as a co-operative society owned by all its members and governed by Belgium law . It has two data centres , one each in Unites states and Netherlands .
You can reach official website of the society by clicking here
RBI PENALIZES 36 BANKS ON NON-COMPLIANCE OF DIRECTIONS ON THEIR SWIFT OPERATIONS
Dated 11.03.2019 : Reserve Bank of India , vide their press release dated 08.03.2019 , informed that they have levied penalties on 36 banks operating in India including public sector banks , private sector banks and international banks for their non-compliance of instructions with regard to operation of SWIFT . The penalty ranges from Rs 1 crore to Rs 4 crores . The instructions were issued after a case with Punjab national Bank came to limelight in the beginning of 2018 in which the concerned bank lost more than Rs 11,000 crores due to misuse of SWIFT system .
RBI press release says :
" An assessment of compliance with RBI directions on implementation and strengthening of SWIFT-related operational controls of 50 major banks was carried out which revealed that banks had not complied with one or more of the major directions pertaining to (i) direct creation of payment messages in the SWIFT environment, (ii) implementation of Straight Through Processing (STP) between CBS/Accounting System and SWIFT system, (iii) ensuring that users entering/ passing/authorizing the transactions in CBS were different from those operating in SWIFT environment, (iv) independent reconciliation of logs generated from SWIFT with corresponding entry passed in the CBS/accounting system, (v) introduction of an additional layer of approval for all payment messages exceeding a particular threshold, and (vi) Nostro reconciliation on T+1/T+5 basis.
Based on the findings of the assessment and extent of non-compliance, Notices (SCNs) were issued to 49 banks advising them to show cause as to why penalty should not be imposed for non-compliance with directions issued by RBI as indicated therein. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI decided to impose monetary penalty on aforementioned 36 banks, based on the extent of non-compliance in each bank. "
For the complete list of banks penalized , amount of penalty and the press release , CLICK HERE
Dated 11.03.2019 : Reserve Bank of India , vide their press release dated 08.03.2019 , informed that they have levied penalties on 36 banks operating in India including public sector banks , private sector banks and international banks for their non-compliance of instructions with regard to operation of SWIFT . The penalty ranges from Rs 1 crore to Rs 4 crores . The instructions were issued after a case with Punjab national Bank came to limelight in the beginning of 2018 in which the concerned bank lost more than Rs 11,000 crores due to misuse of SWIFT system .
RBI press release says :
" An assessment of compliance with RBI directions on implementation and strengthening of SWIFT-related operational controls of 50 major banks was carried out which revealed that banks had not complied with one or more of the major directions pertaining to (i) direct creation of payment messages in the SWIFT environment, (ii) implementation of Straight Through Processing (STP) between CBS/Accounting System and SWIFT system, (iii) ensuring that users entering/ passing/authorizing the transactions in CBS were different from those operating in SWIFT environment, (iv) independent reconciliation of logs generated from SWIFT with corresponding entry passed in the CBS/accounting system, (v) introduction of an additional layer of approval for all payment messages exceeding a particular threshold, and (vi) Nostro reconciliation on T+1/T+5 basis.
Based on the findings of the assessment and extent of non-compliance, Notices (SCNs) were issued to 49 banks advising them to show cause as to why penalty should not be imposed for non-compliance with directions issued by RBI as indicated therein. After considering the replies received from the banks, oral submissions made in the personal hearings, where sought by the banks, and examination of additional submissions, if any, RBI decided to impose monetary penalty on aforementioned 36 banks, based on the extent of non-compliance in each bank. "
For the complete list of banks penalized , amount of penalty and the press release , CLICK HERE
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Who can become the members of SWIFT ?
MEMBERS OF THE SOCIETY
Banks , Financial Institutions , custodians , investment institutions , central banks , market infrastructure providers and corporates can become the members of this society and exchange messages between them in a secured , reliable mode using SWIFT messaging services . Each member is given an unique code to identify them consisting of alphanumerical codes containing 8 to 11 characters . If a member has more than one terminal , which normally happens , each of the terminal will have a separate sub-code . The messages exchanged between the two financial terminals are confidential and no third party will have access to it . However to receive authenticated messages , members have to sign in to Relationship Management Application ( RMA ) , which replaced earlier system of Bilateral Key exchange ( BKE )
For example State Bank of India has SWIFT code of SBININBB and its Agartala branch terminal has code SBININBB476 .
Similarly SWIFT code of Punjab National Bank has SWIFT code of PUNBINBB and code of its chickpet , Bangalore branch is PUNBINBBBCP . They should have exchanged BKE to send and receive authenticated messages between the two . However those who have not exchanged BKE can still send and receive limited types of messages and they will be treated as unauthenticated messages .
Normally few officials of the member banks working in foreign exchange / international departments are given passwords to enter the network and are authorized to send and receive messages . Once the access is provided , there is no restriction either on numbers or amount of transactions they can undertake .
For example State Bank of India has SWIFT code of SBININBB and its Agartala branch terminal has code SBININBB476 .
Similarly SWIFT code of Punjab National Bank has SWIFT code of PUNBINBB and code of its chickpet , Bangalore branch is PUNBINBBBCP . They should have exchanged BKE to send and receive authenticated messages between the two . However those who have not exchanged BKE can still send and receive limited types of messages and they will be treated as unauthenticated messages .
Normally few officials of the member banks working in foreign exchange / international departments are given passwords to enter the network and are authorized to send and receive messages . Once the access is provided , there is no restriction either on numbers or amount of transactions they can undertake .
SWIFT MESSAGING SYSTEM
SWIFT messaging in the SWIFT NETWORK only
Earlier banks used to use Telex system to send and receive payments and messages using bilateral keys exchanged between them till SWIFT software came in to existence to exchange messages . Now SWIFT messaging system has replaced the obsolete telex system for all international payments and messaging .
Present SWIFT software , called SWIFTNet , allows only its members to transmit and receive messages in the network and hence outsiders will not be able to use the software . The network is run on a highly secured environment . Messages can be sent only by authorised employees of the member institutions after authentication and validation by them . As software system is available only to the members , messaging system is less vulnerable to outside attacks of malware .
SWIFTNet has four complementary services :
1. FIN : It is messaging service between members in the traditional SWIFT MT standard formats . Each format has specific purpose . For example , MT 100 format sent suggests a payment to be made to a third party / customer while MT 400 suggests bank to bank payments . MT700 is used for issue of Documentary Credit ( Letter of Credit )
2. INTERACT : It allows messaging between the members like in FIN along with additional facilities of real time messaging and real time query and response in MX formats
3 . FILEACT : It allows transfer of files .
4. WEBACCESS : Members can browse through certain websites of financial institutions allowed on the SWIFT Network .
Thus SWIFT provides secured network for transmitting messages between financial institutions with a standard syntax which is understood by all participants . Further financial institutions can use SWIFT Alliance software to integrate their core banking solutions to the SWIFT messaging system .
We may note here that SWIFT is only a messaging system and it does not make any financial transaction . It only enables transmission of messages between two members and for all errors , commission and omissions of executing the instructions , individual members are responsible .
Present SWIFT software , called SWIFTNet , allows only its members to transmit and receive messages in the network and hence outsiders will not be able to use the software . The network is run on a highly secured environment . Messages can be sent only by authorised employees of the member institutions after authentication and validation by them . As software system is available only to the members , messaging system is less vulnerable to outside attacks of malware .
SWIFTNet has four complementary services :
1. FIN : It is messaging service between members in the traditional SWIFT MT standard formats . Each format has specific purpose . For example , MT 100 format sent suggests a payment to be made to a third party / customer while MT 400 suggests bank to bank payments . MT700 is used for issue of Documentary Credit ( Letter of Credit )
2. INTERACT : It allows messaging between the members like in FIN along with additional facilities of real time messaging and real time query and response in MX formats
3 . FILEACT : It allows transfer of files .
4. WEBACCESS : Members can browse through certain websites of financial institutions allowed on the SWIFT Network .
Thus SWIFT provides secured network for transmitting messages between financial institutions with a standard syntax which is understood by all participants . Further financial institutions can use SWIFT Alliance software to integrate their core banking solutions to the SWIFT messaging system .
We may note here that SWIFT is only a messaging system and it does not make any financial transaction . It only enables transmission of messages between two members and for all errors , commission and omissions of executing the instructions , individual members are responsible .
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Security issues
Though SWIFT messaging system is robust , secured and private . there are reports of attempts to hack the system to steal away funds from members'accounts . One such successful attempt reported was in the case of Bangladesh Central Bank in 2016 , where it is reported that more than USD 81 million was stolen by hacking Alliance Access software . Another attempt reported was from Vietnam also in 2016 .
Similar attempts to hack SWIFT software has been reported from countries like Ecuador and Ukrine
Similar attempts to hack SWIFT software has been reported from countries like Ecuador and Ukrine
SWIFT INDIA
SWIFT India Domestic Services Pvt Ltd (“SWIFT India” or “the Company”), founded on similar principles as SWIFT , is a financial messaging services provider formed by SWIFT SCRL and Indian banks, for the domestic Indian financial community and by the community.
The shareholders of SWIFT India currently comprise of (in alphabetical order) AXIS Bank Ltd, Bank of Baroda, Bank of India, Canara Bank, Citibank, HDFC Bank Ltd, ICICI Bank Ltd, Punjab National Bank, Standard Chartered Bank, State Bank of India, SWIFT SCRL and Union Bank of India.
Through shared resources and capital, SWIFT India functions with the objective of enabling exchange of structured financial information between domestic participants in the domestic Indian community .
SERVICES OF SWIFT INDIA :
1. Payment and Cash management services : Member banks / corporates can make payments directly via " Straight Through Process "
2 . FX Messaging among participants
3. Trade messaging among participants like Letter of credit or Gurantees etc
4. Automated e-stamping of guarantees
The shareholders of SWIFT India currently comprise of (in alphabetical order) AXIS Bank Ltd, Bank of Baroda, Bank of India, Canara Bank, Citibank, HDFC Bank Ltd, ICICI Bank Ltd, Punjab National Bank, Standard Chartered Bank, State Bank of India, SWIFT SCRL and Union Bank of India.
Through shared resources and capital, SWIFT India functions with the objective of enabling exchange of structured financial information between domestic participants in the domestic Indian community .
SERVICES OF SWIFT INDIA :
1. Payment and Cash management services : Member banks / corporates can make payments directly via " Straight Through Process "
2 . FX Messaging among participants
3. Trade messaging among participants like Letter of credit or Gurantees etc
4. Automated e-stamping of guarantees
WHO CAN JOIN SWIFT NETWORK ?
Normally following categories of institutions join the Swift Network :
- BanksPayment, securities and treasury market infrastructures
- Broker/dealers
- Custodians
- Investment managers
- Fund participants
- Corporates
- Exchanges
- Matching utilities
- Clearing houses
An organization in India , who is interested to avail the services of SWIFT , can contact SWIFT INDIA for guidance and to complete necessary formalities
PNB CASE OF MISUSE
A case is reported from State owned Punjab National Bank , Mumbai India where in officials misused the permission to access the SWIFT to open Letter Of Undertakings ( LOU ) on behalf of corporate customer Mr Nirav Modi and other associate companies dealing in diamonds , which were not authorized . Amount involved is reported over Rs 11,400 crores . Some officials of the bank and corporates are under custody and investigation is going on .
Normally Letter of Undertaking ( LOU ) is issued on behalf of a import customer to the exporter's bankers , requesting to extend the loan based on the documents submitted with an undertaking to repay the loan on due date with a specified interest rate . It is alleged that officers issuing such LOUs had not obtained necessary permission from higher ups or collateral security from the importers . It is reported that number of LOUs were transmitted over SWIFT from Punjab National bank , Mumbai Branch over the years 2008 to 217 to various Indian banks situated abroad . No collateral security was obtained from the beneficiary companies . The issue has come out to light in January 2018 , after one of the officials retired from services . We have to wait for investigation details to know how exactly bank lost such a huge amount over the years without authorities realizing the fraud .
Normally Letter of Undertaking ( LOU ) is issued on behalf of a import customer to the exporter's bankers , requesting to extend the loan based on the documents submitted with an undertaking to repay the loan on due date with a specified interest rate . It is alleged that officers issuing such LOUs had not obtained necessary permission from higher ups or collateral security from the importers . It is reported that number of LOUs were transmitted over SWIFT from Punjab National bank , Mumbai Branch over the years 2008 to 217 to various Indian banks situated abroad . No collateral security was obtained from the beneficiary companies . The issue has come out to light in January 2018 , after one of the officials retired from services . We have to wait for investigation details to know how exactly bank lost such a huge amount over the years without authorities realizing the fraud .
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TAX ON RETIREMENT
MORE THAN 2000 VIEWS IN ITS FIRST WEEK OF PUBLICATION
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LAST DATE FOR FILING INCOME TAX RETURN FOR FY 19-20 IS 30.11.2020
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