A Guide to Anti-Money Laundering for Crypto Firms

What is SWIFT / BIC and What is the Significance of Russia’s Removal?

AML Compliance Knowledge & Training

What is SWIFT?

The Swift system, or the Society for Worldwide Interbank Financial Telecommunication, facilitates financial transactions and money transfers for banks located around the world. The system is overseen by the National Bank of Belgium and enables transactions between more than 11,000 financial institutions in more than 200 countries around the world. It sends more than 40 million messages a day, with trillions of dollars changing hands between companies and governments. 

How does SWIFT work?

Swift operates the series of electronic messages that are sent between financial institutions (FIs) to facilitate the transfer of funds. These messages direct FIs to debit and credit accounts as required in order to complete a transaction. 

What is a Bank Identification Code (BIC)?

A Bank Identification code or BIC Code,  is assigned by Swift to a bank – these can be used by financial institutions to identify a bank, instead of using its name. 

Russia and SWIFT: What has happened to Russia’s Swift access?

In a joint statement on February 26th the European Commission, France, Germany, Italy, the UK and the US, Western leaders committed “to ensuring that selected Russian banks are removed from the Swift messaging system.” They argued that this would “ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.” While the names of banks to be expelled have not yet been disclosed, a German government spokesperson said that all currently sanctioned banks will be affected, as well as other institutions if necessary. 

The BBC reports that more than 1 percent of Swift messages are “thought to involve Russian payments.” Russia is particularly reliant on Swift for its oil and gas exports. Iran is the only country to have been removed from Swift before, which led to it losing 30 percent of its foreign trade.

Russia and SWIFT Screening: How should firms respond?

Firms need to ensure they are complying with the latest sanctions regimes against Russia. Having an effective SWIFT screening process in place, will enable firms to mitigate penalties for non-compliance. This is especially important due to the volatile situation in Ukraine meaning that sanctions lists are changing on a daily – even hourly – basis. 

As our sanctions screening best practices article highlights, firms need to:

  • Assess their systems and controls to ensure risks can be detected and managed
  • Provide appropriate and up-to-date training to staff on the risks they need to monitor for
  • Evaluate their exposure to sanctioned entities and the wider nexus around these entities
  • Monitor the latest developments in the media in real-time
  • Build a holistic understanding of the situation through a review of geopolitics, trade, commerce and wider world events

How can SWIFT / BIC screening help firms enhance their sanctions compliance? 

As a provider of real-time global sanctions screening, our customers rely on us to provide continued accurate coverage. Many of our customers screen counterparty banks as part of their compliance programs, but simply screening firms by name can increase the risk of false positives.

As a result, a number of our customers now screen counterparty banks using their BIC. This can help to reduce the risk posed by transactions, and also false positive rates. Some sanctions lists include BICs, and as new sanctions are imposed on Russia, we are updating our database to reflect new BICs that are mentioned. Our team is also working to enrich our database by looking up BICs for sanctioned organizations where only a name is provided. 

Read the latest on Russia/Ukraine sanctions compliance here

What is SWIFT?

The Swift system, or the Society for Worldwide Interbank Financial Telecommunication, facilitates financial transactions and money transfers for banks located around the world. The system is overseen by the National Bank of Belgium and enables transactions between more than 11,000 financial institutions in more than 200 countries around the world. It sends more than 40 million messages a day, with trillions of dollars changing hands between companies and governments. 

How does SWIFT work?

Swift operates the series of electronic messages that are sent between financial institutions (FIs) to facilitate the transfer of funds. These messages direct FIs to debit and credit accounts as required in order to complete a transaction. 

What is a Bank Identification Code (BIC)?

A Bank Identification code or BIC Code,  is assigned by Swift to a bank - these can be used by financial institutions to identify a bank, instead of using its name. 

Russia and SWIFT: What has happened to Russia’s Swift access?

In a joint statement on February 26th the European Commission, France, Germany, Italy, the UK and the US, Western leaders committed “to ensuring that selected Russian banks are removed from the Swift messaging system.” They argued that this would “ensure that these banks are disconnected from the international financial system and harm their ability to operate globally.” While the names of banks to be expelled have not yet been disclosed, a German government spokesperson said that all currently sanctioned banks will be affected, as well as other institutions if necessary.  The BBC reports that more than 1 percent of Swift messages are “thought to involve Russian payments.” Russia is particularly reliant on Swift for its oil and gas exports. Iran is the only country to have been removed from Swift before, which led to it losing 30 percent of its foreign trade.

Russia and SWIFT Screening: How should firms respond?

Firms need to ensure they are complying with the latest sanctions regimes against Russia. Having an effective SWIFT screening process in place, will enable firms to mitigate penalties for non-compliance. This is especially important due to the volatile situation in Ukraine meaning that sanctions lists are changing on a daily - even hourly - basis.  As our sanctions screening best practices article highlights, firms need to:
  • Assess their systems and controls to ensure risks can be detected and managed
  • Provide appropriate and up-to-date training to staff on the risks they need to monitor for
  • Evaluate their exposure to sanctioned entities and the wider nexus around these entities
  • Monitor the latest developments in the media in real-time
  • Build a holistic understanding of the situation through a review of geopolitics, trade, commerce and wider world events

How can SWIFT / BIC screening help firms enhance their sanctions compliance? 

As a provider of real-time global sanctions screening, our customers rely on us to provide continued accurate coverage. Many of our customers screen counterparty banks as part of their compliance programs, but simply screening firms by name can increase the risk of false positives. As a result, a number of our customers now screen counterparty banks using their BIC. This can help to reduce the risk posed by transactions, and also false positive rates. Some sanctions lists include BICs, and as new sanctions are imposed on Russia, we are updating our database to reflect new BICs that are mentioned. Our team is also working to enrich our database by looking up BICs for sanctioned organizations where only a name is provided.  Read the latest on Russia/Ukraine sanctions compliance here

Originally published February 28, 2022, updated May 5, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

Copyright © 2022 IVXS UK Limited (trading as ComplyAdvantage).