A SWIFT code may be required to tell banks and financial organizations where to send the money when a global financial transaction is made. Banks and money transfer services determine where to send money on a global scale with the SWIFT code. The SWIFT code is an international code.
What Does SWIFT Stand For?
SWIFT stands for Society for Worldwide Interbank Financial Telecommunications.
What Is SWIFT?
Society for Worldwide Interbank Financial Telecommunications (SWIFT) provides its members with safe and secure global financial transactions. SWIFT was founded in Brussels in 1973. It was supported by 239 banks in fifteen countries at the time of its establishment.
SWIFT has evolved since 1973, and as of 2018, nearly half of the high-value cross-border payments worldwide have used the SWIFT network. As of 2015, SWIFT has linked more than 11,000 financial institutions in more than 200 countries and regions. SWIFT sends payment orders that need to be resolved with correspondent accounts owned by each other.
According to Belgian law, SWIFT is a cooperative society owned by member financial institutions and has offices worldwide. Companies used Morse code sent by telegraph before SWIFT. It has created a safer and faster communication mechanism between financial institutions worldwide. It contains about 200 kinds of SWIFT messages. For example, the standard payment order from one organization to another is MT103. AML / CFT regulations define MT103 as the primary method of international payments in many countries.
Some financial analysts have described removing Russia from SWIFT as a nuclear option, which would be an unprecedented move against one of the world's largest economies.
How Does Swift Work?
SWIFT is a vast messaging network used by financial institutions such as banks to send and receive money transfer orders. SWIFT works through a standard code system. It assigns a unique code of eight or 11 characters to each financial institution. The code is alternately called bank identification code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code. The codes are assigned according to the rules below.
- The first four characters: institute code
- The next two characters: country code
- The next two characters: city code
- The last three characters: optional branch code
Customers who transfer money using international lines must use a SWIFT / BIC code since banks and money transfer services determine where to send money on a global scale using SWIFT. Since the SWIFT / BIC code is a national code, a bank on one side of the world can find the right bank on the other side of the world. Bank transfers using the SWIFT system usually pass through 1-3 intermediary banks, each of which may charge a fee. As a result, international transactions fees might be higher than local transactions.
Which Industries Do Use SWIFT?
Although SWIFT was only used for treasury transactions when it was first established, it has developed gradually and serves many sectors today. Some of these sectors are:
- Treasury Market Participants and Service Providers
- Trading Services
- Securities Dealers
- Corporate Business Houses
- Asset Management Companies
- Brokerage Institutes and Trading Houses,
- Foreign Exchange and Money Brokers.
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