A BIC number, also known as a SWIFT code, is a critical component of international bank transactions in banks and financial organizations. The general messaging system is called SWIFT, which stands for "Society for Worldwide Interbank Financial Telecommunication." The code used in the system is called BIC, which refers to the "Business Identifier Code." Currently, BIC and SWIFT are practically interchangeable. As codes or numbers, they represent the recipient bank in a money transaction.
BIC is the International ISO standard ISO 9362. This standard defines the components and structure of a universal identifier code, known as a business identifier code (BIC), for financial and non-financial organizations that require such an international identity to simplify automated information processing.
There are two types: connected BICs with SWIFT network access and non-connected BICs with no access and just used for reference.
SWIFT Code vs. BIC Code
Although SWIFT codes and BICs may appear to be complex, they are ideal for those who need to transmit international payments. As such, these are critical concepts to understand, especially if your company has a global presence.
Is there a distinction to be made between a SWIFT code and a BIC? The short answer is no.
Both names are commonly used interchangeably to mean the same thing. As a result, different financial organizations and banks simply brand them with different names.
It's also worth mentioning that these codes go by several names, such as SWIFT identifiers and SWIFT ID. In practice, however, there is no discernible distinction between these names.
To offer a standardized and safe method of delivering international payments, the Society for Worldwide Interbank Financial Telecommunication (or SWIFT) system was developed. SWIFT is simply a communications network that allows various banks to exchange and receive information electronically. SWIFT's standardized format aids in avoiding miscommunication among banks in various jurisdictions, making payments easier and faster with less potential for error.
What Do SWIFT Codes Look Like?
The format of all BIC and SWIFT codes is the same. They range in length from 8 to 11 characters and are structured as follows:
- AAAA - A four-character bank code that appears to be a truncated form of the bank's name.
- BB - A two-character country code that indicates the nation in which the bank is located.
- CC - A two-character geographic code that indicates the location of the bank's headquarters.
- DDD - 3-character branch code (optional) indicating the location of the specific branch
Some banks will have a shorter (8-character) BIC code since they do not employ the 3-character branch code. The branch code for these banks may be substituted by a triple X (i.e. MIDLGB22XXX) or eliminated completely.
How Do SWIFT Codes Operate?
Banks use a network of correspondent banks to transfer foreign payments. These correspondent banks collaborate to shift your money from one jurisdiction to another before it reaches its final destination. SWIFT codes guarantee that your payment is sent to the correct bank.
It's an easy process for the customer. Once you've obtained your recipient's SWIFT number and checked its accuracy, go to your local branch and request an overseas payment. You may also make the payment using your online banking account.
Banning of Russian Banks From SWIFT
The EU legally adopted sanctions (Council Decision (CFSP) 2022/346 & Council Regulation (EU) 2022/345) on March 2, 2022, making it illegal to offer SWIFT services to the following seven Russian banks beginning March 12, 2022:
- VTB Bank, Bank Otkritie, Novikombank, Promsvyazbank, Rossiya Bank, Sovcombank, and VEB or,
- Yo any entity founded in Russia and owned (directly or indirectly) by one of the foregoing companies by more than 50%.
It means that the aforementioned banks will be barred from using SWIFT to transmit payment messages to any other bank or institution connected to it anywhere in the globe.
The EU has warned that it is ready to add other Russian banks to this list at any time.
Sberbank and Gazprombank are excluded from the ban. They were exempted because they manage payments for oil and gas exports, which are vital to the EU.
Transaction Monitoring to Detect Financial Crime in Swift Transfers
Recent research commissioned by the SWIFT Institute examined the present financial transaction monitoring model and suggested future prospects.
Transaction monitoring, or the monitoring of a bank's or financial institution's client money transactions, has emerged as a critical Financial Crime Compliance (FCC) function.
The Financial Action Task Force (FATF) sets worldwide standards for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). The FATF has enacted regulations and laws requiring banks to monitor customer transactions for irregularities and report suspicious activities. These rules and regulations have resulted in the development of a transaction monitoring model in the private sector, notably among banks and financial institutions.
This paradigm incorporates automated platforms that employ alleged patterns of criminal activity, sometimes known as 'typologies' or 'red flags.' When applied to transactions, this monitoring approach can create financial crime warnings.
Using Sanction Scanner's Transaction Monitoring, firms may monitor transactions, define rules that will alert them when they are activated, and view their AML & KYC-related procedures. A dependable transaction monitoring software decreases AML false positives and AML Compliance officers' burden.
Be wary of suspicious transactions
Sanction Scanner watches your customer's transactions in real-time to detect questionable activity. If the program identifies a suspicious transaction, it pauses the transaction and records it for further examination. With API, you may easily incorporate Sanction Scanner into your project.
Create scenarios and rules
The rule-writing function allows you to establish rules and create scenarios. It will assist you in reducing false positive alarms, focusing on correct alerts, and decreasing your burden.
With real-time alarms, you can quickly respond to suspicious transactions
Alarms should not be ignored till the end of the day. You may view suspicious alarms based on your scenarios and regulations, as well as alarms based on their risk ratings (1-5).