Society For Worldwide Interbank Financial Telecommunications Research Articles

Cyber and the City: Securing London's Banks in the Computer Age by Ashley Sweetman

Reviewed by: Cyber and the City: Securing London's Banks in the Computer Age by Ashley Sweetman Jacob Ward (bio) Cyber and the City: Securing London's Banks in the Computer Age By Ashley Sweetman. Cham: Springer, 2022. Pp. vii + 230. Ashley Sweetman's Cyber and the City is valuable reading for any historian researching the intersections of finance and digital technology. The book investigates computer security in London's clearing banks from the 1960s to the 1990s across six chapters. Three "overview" chapters provide wider technological, political, and industrial context on financial computer security from 1960 to 1977, and three "case study" chapters take deeper dives into the role of security in developing three important financial systems still in use: the Bankers' Automated Clearing Services (BACS), the Society for Worldwide Interbank Financial Telecommunications (SWIFT), and the Clearing House Automated Payment System (CHAPS). Sweetman argues that banks thought about computer security in two ways. First, banks valued confidentiality, integrity, and availability as key virtues of a secure system. Second, banks upheld these virtues by building "resilience" into their systems. Banks assumed that security breaches would happen, and so security measures should mitigate against this to preserve confidentiality, integrity, and availability. Overall, Sweetman concludes that there were no significant shifts or ruptures in this period, which was instead defined by "consensus and continuity," both with predigital and present approaches to financial security. Cyber and the City's greatest strength is the new histories that it documents. Sweetman has researched several archives and cases that have not received historical attention. In so doing, he gives new insight into the development not just of computer security in finance but also the development of the financial systems themselves. BACS and CHAPS remain crucial to British banking, and SWIFT, as Russia's exclusion in 2022 shows, is globally important geopolitically as well as financially. Their histories are fundamental to understanding the past and present of finance's digital infrastructure, and so Sweetman's book will be an invaluable reference work for their histories. [End Page 613] Furthermore, the book challenges the idea that cybersecurity is about hacks and cyberattacks. Sweetman shows how financial security was more concerned with accidents and faults than malicious attacks and that even when focusing on attacks, banks and security analysts spent much more time concerned with physical threats such as arson and bombings. For example, banks saw the destruction of BACS's computer center as their main security threat and so enacted both physical and technical measures to make BACS resilient to damage. Component failure was a major concern across all three of Sweetman's case studies, and so computer security in these systems often meant creating hardware and software redundancies. In Cyber and the City, computer security is a story of the mundane, material practices of maintenance and contingency planning. It is this perspective, however, that raises some weaknesses in the book. The book does not explicitly analyze the materiality of computer security, and this is instead my own interpretation. Though the book is a fabulous documentation of computer security in finance, it never places this history within the bigger picture. For example, the growing scholarship on repair and maintenance, spearheaded by Andrew Russell and Lee Vinsel, would help Sweetman articulate with more depth what he means when he describes "resilience," especially to physical faults and attacks, as the key approach in computer security in British finance. The extensive work on the materiality of financial markets by Donald Mackenzie and his collaborators would also help here, especially Juan Pablo Pardo-Guerra's Automating Finance (2019), which analyzes how "market engineers" transformed British finance across the same period. In Cyber and the City, the materiality of financial security seems key to the smooth functioning of financial markets, but the nuances of this relationship could be thought through more. As it stands, the book does not discuss how this history might develop our understanding of financial markets and how engineers, technologies, and security analysts make them work. This book could therefore present a richer account that interprets how this history fits into the wider scholarship. Nevertheless, for the histories that it brings to light, it will be an important work for...

New sanctions of the European Union and United States against Russia and their impact on Tajikistan’s socio-economic development

The article examines the socio-economic relationship between Tajikistan and Russia, the new European Union and USA sanctions against Russia and their impact on the economy and well-being of Tajikistan, and the role of Society for Worldwide Interbank Financial Telecommunication (SWIFT) in Russian and Tajik banks, including the disconnection of SWIFT from Russian banks and its impact on remittances of migrant workers in Tajikistan. Attention is paid to Tajikistan’s crisis management policy. After gaining independence, Tajikistan’s economy suffered greatly from the civil war in the republic. Russia is one of the main donors to Tajikistan’s economy. There are countries that are more connected to Russia than Tajikistan, but it is difficult to find a country that could compete with Tajikistan in terms of dependence on Russia. Almost all sectors of Tajikistan’s economy depend on Russia: Tajikistan is a donor country for migrant workers, and remittances from migrant workers play an important role in Tajikistan’s economy. Only, at the expense of money transfers of Tajik labor migrants, the banking sector of Tajikistan is supported. Over the years of independence, Tajikistan has not taken its economy out of the influence of Russia. The dependence of the Tajik economy on Russia manifested itself in the very first days of the conflict actions on the territory of Ukraine in February 2022. After the statement of Western countries on the introduction of new sanctions to restrict the access of some Russian banks to the SWIFT, the problems of the financial intermediation market of Tajikistan were exposed. An unprecedented package of sanctions by Western countries due to the situation with Ukraine has already led to a number of problems inside Tajikistan. European Union and USA sanctions against Russia have also had a strong impact on all sectors of Tajikistan’s economy, from food prices to the banking sector. The aim of the article is to assess the role of the new European Union and USA sanctions against Russia in connection with the conflict in Ukraine and their impact on the economy and welfare of Tajikistan.

The impact of financial sanctions on the international monetary system

ABSTRACT After the outbreak of the conflict between Russia and Ukraine, the United States and Europe have taken financial sanctions against Russia, which have had an important impact. The frequent use of financial sanctions has exacerbated the distrust of the dollar system in emerging markets and developing countries, and shaken the logic of the dollar and the Society for Worldwide Interbank Financial Telecommunications (SWIFT) system as public goods of the international monetary system. However, the position of the US dollar and SWIFT is still hard to change. This does not mean that the international monetary system will remain the same forever. As the willingness to hold foreign exchange reserves declines, emerging markets and developing countries will either increase their tolerance of exchange rate volatility or implement more capital account regulation. Therefore, in the trend of de-globalization in the future, the international monetary system will turn out to be more volatile.

Are the Russian Banks Threatened with Removal from SWIFT? A Multiple Case Study on Interbank Financial Messaging Systems

When Russia invaded Ukraine in February 2022, the United States, European Union, and their allies removed the Russian banks from the main interbank payment system worldwide, SWIFT (Society for Worldwide Interbank Financial Telecommunication), which is a secure messaging system that makes cross-border payments possible, vital for the international trade. However, it is not the first time that Russian banks are threatened with disconnection from Swift by the US government. In response, the Central Bank of Russia developed in 2014 the SPFS (System for Transfer of Financial Messages, our translation). In addition, the Chinese government created in 2015 an equivalent system named Cross-Border Interbank Payment System (CIPS). In this article, we examined SWIFT and alternatives, such as the Russian SPFS, the Chinese CIPS, and the Indian SFMS. Key findings pointed out crucial differences between the financial messaging systems, their objectives, and the expansion of operations overseas. Finally, discussion and implications to the global economy compile this work.

The International Monetary System: New Evidence Concerning a Transition to Multipolarity

This article focuses on the transition of the international monetary system to a multipolar structure. The international monetary system continuously evolves, reflecting developments in the world economy. The main problem of the current international monetary system is its dependence on one key currency which still remains the US dollar. The authors of this study address the issue of a transition towards a multipolar system by examining currency concentration. The primary objective of this work is to establish whether or not the current international monetary system shows signs of transitioning towards multipolarity. To achieve this, the authors have used tools measuring the level of market concentration. The change of polarity of the international monetary system is analysed with concentration ratios and the Herfindahl-Hirshmann index. The theoretical part focuses on definitions of key terms essential for this study, such as international monetary system, currency polarity, global currency, and currency concentration. For the practical part, data were sourced from the databases of global institutions, namely the International Monetary Fund (IMF), Bank for International Settlements (BIS), Society for Worldwide Interbank Financial Telecommunications (SWIFT) and the European Central Bank (ECB). This part focuses on a period of time between 2001 and 2019, and the results indicate that the current international monetary system shows signs of transitioning towards a multipolar structure. The level of currency concentration of the key reserve currencies dropped slightly, although not enough to cause a qualitative change of the current international monetary system. This study may serve as a base for future research on this topic.

Innovating operational resilience with financial messaging standards

The unforeseen crisis that was brought on by COVID-19 in 2020 has caused numerous disruptions to the industry. The key to remaining operationally resilient is to adapt. This paper explores the opportunity and benefits from the upcoming Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment message migration to ISO 20022. This paper recommends that the industry should proactively embrace new financial messaging standards. This effort should be championed as an investment to future-proof shocks with operations and regulatory risk. This is not just another ‘IT project’ but rather a globally coordinated effort where major central banks are leading the effort. In the end, the paper also advocates best practice on adopting the latest standards from a business analysis perspective.

Application programming interfaces: The new (old) game in town

This paper analyses the impact of regulatory pressures, combined with new, better, faster and cheaper technology, which are key drivers in the evolution of financial markets. Financial institutions increasingly recognise that continuing with old processes will not deliver the required efficiencies that continue to drive market growth. So, institutions need to accept change if they are going to reap the benefits of the last ten years of painful market reforms. As we look to the future, application programming interfaces (APIs) will continue to improve both efficiency and connectivity, with banks, clients and partners further adopting this technology to share data and integrate ecosystems securely and in real time. If the wholesale banking market wants to create modern, integrated, frictionless, and above all, better clientcentric experiences, then API adoption is key. There is also an opportunity to further improve banks’ engagement with other financial institutions. To date, this has often involved Society for Worldwide Interbank Financial Telecommunication (SWIFT), which prescribes how often (and what type of) data can be exchanged. As connectivity improves and transactions increasingly take place in real time, however, the limitations of this approach have become more apparent and something needs to change. Technology is a great enabler of change. APIs are not new, but it is their rate of development and increased adoption that is changing the game. Welcome to the new world of financial markets. Why did it take so long?

Analysis of cyber attacks on banking systems

The article discusses the main methods by which cybercriminals carry out attacks on financial organizations using ATM vulnerabilities (network attacks, blackbox attacks, exiting the user’s restriction of computer use by only one application (kiosk mode) and connecting to the hard drive). The main vulnerabilities of banking systems are analyzed, the results of Positive Technologies research on the percentage of ATMs exposed to the above vulnerabilities are described, and recommendations are made to increase the level of security of information systems of financial organizations. Various, including phishing attacks on the SWIFT (Society for Worldwide Interbank Financial Telecommunications) and AWP CBD (automated workplace of a Bank of Russia client) systems of the most dangerous criminal hacker groups: Cobalt, MoneyTaker and Silence, are considered.

It-Based Usury Free Financial Innovations

Despite development and extension of different ways of financing in financial markets, encompassing Islamic and conventional financing, the mechanism of Electronic Funds Transfer (EFT) of project financing both as borrowed and non-borrowed methods has not been considered at most. Moreover overall IT infrastructures development namely Real Gross Settlement System (RTGS), Automatic Clearing House (ACH), Scriptless Security Settlement System (SSSS) and International Bank Account Number (IBAN) for authentication process and the international meta bank network of Single Euro Payment Area (SEPA) and also international integrated banking networks including the Society For Worldwide Interbank Financial Telecommunication (SWIFT) and Interbank Information Transfer Network (Shetab), and other accomplished endeavors are not efficient in absorbing international contributions for project financing through foreign exchange funds in the different countries, satisfactory E-Payment mechanism in informative portal systems for investment projects are weak. In this way, the role of applying E-Payment systems for attracting foreign investment through retail resources mobilization and design of financial instruments with the capability of transacting in the secondary markets should be reconsidered. In this paper by having a glance at different types of investment project financing, we introduce a new project financing mechanism based on E-Payment with non-usury financial instruments to complete investment project financing chain in the form of Rastin Profit and Loss Sharing (PLS) banking.Sharia compliance of financing instruments in one side and accessibility in absorbing international retail foreign exchange sources on other side are two fundamental discussible items in this paper. In this way by designing a new system of "Non-Usury Scriptless Security Settlement System" (NSSSS) with non-usury mechanisms -avoiding legislative (Sharia) circumvention- can provide the two cited goals in designing non-usury financing instruments through IT-based non-usury financial innovations which includes of Rastin Certificates in Rastin PLS banking, and Non-Usury Bonds namely Rastin Swap Bonds.

The internationalisation of the RMB: New starts, jumps and tipping points

We investigate the process of currency internationalisation of the Chinese Renminbi (RMB). Aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) allows better measurement of the role played by a currency in trade and settlement. RMB transactions are significant and increasing but remain concentrated in key financial centres. Analysis using an asset pricing framework shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation and its usage as an alternate vehicle currency.

UN Financial Sanctions on Iran

Asset freeze requirements are central to most UN Security Council sanctions regimes. In order to ensure proportionality and minimise unintended consequences, certain exemptions are built into the requirements of each regime. In the case of UN sanctions on Iran, the exemptions extended to assets connected with contracts in place before sanctions were imposed. While UN sanctions on Iran were in place, an Iranian financial entity (IFE), otherwise subject to the asset freeze, made payments over several years under such a contract. Payments were received largely on schedule except for a period of about thirteen to fourteen months after the IFE was excluded from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system. Jonathan Brewer shows how UN asset freeze exemptions worked as intended in this case.

The global network of payment flows

SWIFT (Society for Worldwide Interbank Financial Telecommunication) provides a network for financial institutions to send and receive information about financial transactions in the form of secure standardized messages. Here we analyze the global network created by flows of a particular type of SWIFT message, MT103, which represents a single customer credit transfer. MT103 is the most commonly-sent SWIFT message type and therefore may be a useful measure of global economic activity. We find that certain aspects of the MT103 networks are notably affected by global political and economic events; for example, we see a large reduction in links beginning in 2007 likely due to increased financial regulation, and we see a lasting effect of the financial crisis of 2007-2009 demonstrated by a reduction in the number of messages sent. At the same time, however, the underlying structure of the MT103 networks remains quite stable during the period of study. The networks are well-described by a tiered model also seen in many payment system networks, with a stable core of densely connected countries. In addition, the networks exhibit a strong community structure, the largest communities roughly corresponding to Europe, the former Soviet Union, and the United States plus much of Latin American and Asia. The United States is consistently the most important country in the networks according to various metrics. The empirical analysis conducted here not only increases our understanding of the SWIFT MT103 network in particular, but also may lead to improved modeling of financial systems in general.

The Internationalisation of the RMB: New Starts, Jumps and Tipping Points

We investigate the process of currency internationalisation by determining the pace of internationalisation of the Chinese Renminbi (RMB). In contrast to other published work that relies upon international banking, trade and currency statistics, we utilise aggregated cross-border data provided by the Society for Worldwide Interbank Financial Telecommunications (SWIFT). This data allows better measurement of the role played by a currency in international trade and capital account settlement.RMB transactions in these areas have expanded significantly in recent years, although they remain concentrated in the financial centres of Hong Kong, Macau, Singapore and Taipei, where language and culture offer clear advantages. Recent RMB cross-border activity in London and New York shows that there is the potential to shift activity beyond the Asia-Pacific region, although the limited scope of RMB transactions highlights the underdevelopment of China’s domestic financial markets and the limited nature of cross-border transactions outside trade settlement and foreign exchange trading.Our analysis shows that the footprint of Chinese corporations in international markets has at times been significant, with the size of these transactions prompting many to reassess the likely pace of RMB internationalisation. However, on-balance China’s path to RMB internationalisation remains slow and runs the risk of failing to fully capitalise upon the opportunities that are now unfolding as the international economic and political landscape shifts more towards its favour.

The social construction of an EU interest in counter-terrorism: US influence and internal struggles in the cases of PNR and SWIFT

The construction of the Area of Freedom, Security and Justice has seen the pooling of a significant amount of national sovereignty at the European Union (EU) level through the establishment of internal EU competences. This process has also had the important side-effect of an increasing development of an EU interest in various areas of security, including in counter-terrorism. This article examines the processes through which the EU interest in counter-terrorism is constructed. It argues that, in line with social constructivist literature, it is important to conceptualise interests as being mutually constituted through interactions amongst political actors. It further develops two arguments in this respect. First, the United States (US) has exercised significant influence on the shaping of the EU interest in counter-terrorism. This point is particularly well-illustrated by the Passenger Name Record case. The second argument put forward by this article is that the process through which the EU interest is shaped has become increasingly complex, in particular following the entry into force of the Lisbon Treaty, which reinforced the powers of the European Parliament. A particularly apt illustration of this argument is the case of the SWIFT (Society for Worldwide Interbank Financial Telecommunication) Agreement.

Origins and development of SWIFT, 1973–2009

Research in this article traces the origins of a not-for-profit financial institution called the Society for Worldwide Interbank Financial Telecommunication (SWIFT). SWIFT is a core part of the financial services infrastructure and is widely regarded as the most secure trusted third party network in the world, serving 200 countries with over 8000 users. The analysis focuses on how the design and current state of SWIFT was influenced by its historical origins. In order to ensure widespread compatibility in a sector experiencing asynchronous technological development, legacy Telex specifications had to be accommodated in SWIFT's design. Over time, what began as a closed ‘society’ founded to reduce errors and increase efficiency in interbank payments grew into an industry cooperative supporting an enthusiastic community of practice and transformed into an unexpected network phenomenon. SWIFT achieved such success that it has been accused of being an installed base stifling innovation. In recent years, SWIFT has had to institute new categories of membership in an effort to counter concerns about its bank-dominated governance and it continues to search for ways to meet the requirements of key constituents in the financial supply chain.

The European Parliament as a ‘Norm Taker’? EU-US Relations after the SWIFT Agreement

EU-US relations in internal security demonstrated a tendency to be turbulent. As a result, EU-US cooperation has not evolved into a partnership but into an asymmetrical relationship within which the EU has become a 'norm taker' - a recipient of US security norms. With this perspective in mind, it is time to take stock of the changes in the institutional configuration of the EU brought about by the Lisbon Treaty. In particular, the European Parliament (EP), often a vocal critic of the transfer of US security norms to the EU in the past, has been empowered to consent to international agreements. We therefore examine whether the EU remains a recipient of US security norms after Lisbon through the first case of its kind: the EU-US Society for Worldwide Interbank Financial Telecommunication (SWIFT) Agreement. By rejecting the first of the two agreements, the EP generally acted contrary to the preferences of the Council and United States, who were mostly in favour of the agreement. Despite this opposition, the EP gained few concessions from the United States and Council in the second round of negotiations for a permanent SWIFT Agreement, with their emphasis on security trumping most of the EP's data protection concerns. In sum, the use of theories on norm internalization allows us to conclude that, after Lisbon, the EP has abandoned its previous critical stances and is now becoming a new 'norm taker' within the EU-US relationship.

Tracking Terrorist Finances: The ‘Swift’ Program and the American Anti-Terrorist Finance Regime

This article examines the political and legislative history of a formerly classified anti-terrorist finance program initiated in the days after 9/11 that subpoenaed millions of financial records from the Belgian-based Society for Worldwide Interbank Financial Telecommunications (SWIFT) without the knowledge of European authorities. The European outrage in response to its public disclosure in 2006 — and the subsequent struggle to generate support for the continuation of the program — has been interpreted by many as further evidence of a strategic divide concerning American and European efforts to thwart terrorism. This research will investigate the dramatic changes to the American anti-terrorist finance regime after 9/11, and will demonstrate that the European reluctance to cooperate with this program represents a fundamental disagreement concerning the prioritization of privacy rights rather than an unwillingness to take the steps necessary to combat the financing of terror.

The Reasons to Lack of Electronic Banking Achievement in Iran

Back ground: electronic banking is an important and fundamental issue that plays an important role in reaching to electronic government. Generally speaking electronic banking includes all banking services using electronic system by the virtue of safe mediators in a way that physical presence is no longer necessary. The beginning of electronic banking turns back to 1960s when computers were used in banks for the first time. The second round of electronic banking started at late 1970s and it was named automation of the office. Using telecommunication services was also common in this period. The third round started in the middle of 1980s by connection of customers to accounts. In this round the connection of customers with their accounts, telephone, ATM, etc was used. Finally, fourth period was accompanied by uniting the systems and connecting the customer to all banking operations. The beginning of electronic banking in Iran goes back to 1981-1991. Tejarat bank issued the first bank card in 1991 and after that Sepah bank started to establish 7 ATM stands all over the country. In 1992 Iran joined SWIFT(Society for Worldwide Interbank Financial Telecommunication ) international channel and it was connected to the channel in 1993. Methods: The type of study is operational from the perspective of its aim and practical from the perspective of its implementation and it includes two parts. The first part is concerned with a comparison of banking systems in Turkey-Malaysia and Iran. The second part is however concerned with the obstacles in the way of electronic banking in Iran including: management obstacles, financial obstacles, technical obstacles, cultural obstacles and safety obstacles. It is attempted to use statistics from the organizations like central bank, telecommunication center, etc and study the amount of influence in each of them. Statistical data used in this study is during 20102011. Results: The result of the first chapter of the present study is the importance of Internet, frameworks and encouraging policies to impress beneficiaries to use electronic banking. The second part introduces the cultural elements as the most important ones and then it attracts our attention to financial elements (the cost of Internet and commissions) as the second influencing factor the influence of technical elements is fading away due to the improvements in banking system. Different parameters like management obstacles also play an important role in the way of electronic banking. The safety obstacles are influenced by the cultural issues and their direct influence is not certified. Ghareche and Abdolbaghi introduce Internet foundation and decrease in service expenses, managers and experts, that this study confirms Internet foundation and decrease in service expenses. Moghali confirm culture as effective parameter (indirectly). Amade and Jafarpour introduce culture-social, management and reject financial and technical parameters, that this study only confirms culture-social parameters as effective parameter. Conclusion: The result of study does not certify the safety obstacles and cultural, financial, and technical management obstacles are influencing respectively.

The Choice Among Interbank Settlement Systems: The European Experience

This paper addresses the choice of banks between alternative channels for interbank payments. The conventional view assumes a tradeoff between the safety of real‐time gross settlement (RTGS) and the liquidity savings of multilateral netting. Moreover, correspondent banking is believed to be inefficient, both in terms of liquidity and of administrative costs. In the last decade, however, the impulse of the Committee on Payment and Settlement Systems, technological changes and the management of RTGS systems by central banks have reduced the difference between the various systems. This is especially true for risk, whereas liquidity cost crucially depends on the refinancing policy adopted by the central bank and the co‐ordination among the participants. On the basis of the recent evolution of payment systems in Europe, we verify the importance of liquidity, as well as other variables like transaction costs, for the choice of banks among different settlement systems. Cost factors imply that the nature of payments flows (value, commercial versus financial) and some structural features of the banking systems (dimension of the intermediaries, concentration of the banking sector) become important. The analysis is carried out both through a theoretical model and a cross‐country comparison based on three data sources: ECB (European Central Bank, EBA (Euro Banking Association) and SWIFT (Society for Worldwide Interbank Financial Telecommunication).

User security enhancement: A worldwide security project

The Society for Worldwide Interbank Financial Telecommunication (S.W.I.F.T.) provides financial processing and communication services of the highest quality and integrity. Its network and value-added services enable customers to reduce costs, raise productivity and control risks. Security is one of the key benefits that S.W.I.F.T. offers to customers, and the User Security Enhancement (USE) programme is a major part of the company's security strategy.