Israel Matzav

Iran shut out of international banking system

The European Union Council has instructed the Belgian-based Society for Worldwide Interbank Financial Telecommunication (SWIFT), a member-owned cooperative that provides some 10,000 financial institutions and corporations in 210 countries worldwide with the means to exchange secure electronic financial messages, to disconnect Iran from the banking system. And SWIFT is complying.

Following an EU Council decision, SWIFT is today announcing it has been instructed to discontinue its communications services to Iranian financial institutions that are subject to European sanctions.

The new European Council decision, as confirmed by the Belgian Treasury, prohibits companies such as SWIFT to continue to provide specialised financial messaging services to EU-sanctioned Iranian banks. SWIFT is incorporated under Belgian law and has to comply with this decision as confirmed by its home country government.

“This EU decision forces SWIFT to take action” said Lázaro Campos, CEO of SWIFT. “Disconnecting banks is an extraordinary and unprecedented step for SWIFT. It is a direct result of international and multilateral action to intensify financial sanctions against Iran.”

The EU-sanctioned Iranian financial institutions and the SWIFT customer community have been notified of the disconnection, which will become effective on Saturday 17 March at 16.00 GMT.

SWIFT has been and remains in full compliance with all applicable sanctions regulations of the multiple jurisdictions in which it operates, and has received confirmation of this from the competent regulatory authorities. As a global provider of secure messaging services, SWIFT has no involvement in or control over the underlying financial transactions that are contained in the messages of its member banks.

This is a major step.

Tehran uses SWIFT's technology to conduct business with its trading partners, to sell its oil, to raise capital for its energy sector, to procure energy-related equipment and technology, and to buy and sell other goods and services. Indeed, 19 Iranian banks and 25 Iranian entities reportedly used SWIFT more than 2 million times in 2010. These transactions, the Wall Street Journal noted in a recent editorial, amounted to $35 billion in trade with Europe alone. And they almost certainly violate existing sanctions laws. Cutting off this source of cash could be hugely consequential for those who seek to peaceably halt the Islamic Republic from developing a nuclear weapon.

SWIFT represents one of Tehran's last entry points into the world financial system. In recent years, the United States and the European Union have sanctioned scores of banks, energy companies, and other entities under the control of Iran's Islamic Revolutionary Guard Corps (IRGC) -- which Washington has designated a terrorist organization -- for their connections to nuclear proliferation and terrorist activities. This includes banks like Mellat, Sepah, Saderat, Post, and the Central Bank of Iran.

For more details on the impact of SWIFT's move, go here.

Labels: Iran sanctions regime, Iranian nuclear threat

posted by Carl in Jerusalem @ 5:56 PM