US, Canadian and European leaders to cut some Russian banks from global financial messaging system SWIFT – Mothership.SG

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US and European allies announced drastic new financial sanctions against Russia as the invasion of Ukraine showed no signs of letting up, with explosions and gunfire reported on the streets of its capital, Kiev.

On the morning of February 27 (Singapore time), the White House issued a joint statement announcing that it would cut off some Russian banks from the global payment system, SWIFT, among other measures.

“First, we are committed to ensuring that certain Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and will harm their ability to operate globally.”

In addition to the European Commission, France, Germany and Italy, the United Kingdom and Canada are also engaged in this endeavor.

What is SWIFT?

The Society for Worldwide Interbank Financial Telecommunications (SWIFT) is based in Belgium.

It connects more than 11,000 financial institutions around the world, according to the New York Times. It enables banks and businesses to communicate across borders on financial transactions.

For example, if a company in the United States wishes to purchase supplies from a supplier in France, the purchase order will be verified by the SWIFT messaging system.

Without SWIFT, a businessman or bank in the sanctioned country will have to find a new way to transmit these payment instructions when engaged in international transactions.

It could also affect transactions down to the individual level.

In 2014, Iran was cut off from access to SWIFT due to concerns about its nuclear program.

In 2019, then Russian Prime Minister Dmitry Medvedev said that losing SWIFT would amount to a declaration of war against Russia.

Ukrainian Foreign Minister Dmytro Kuleba has been pushing for other countries to cut off Russian financial institutions from SWIFT, in a series of tweets over the past few days.

Russian central bank targeted

In addition to cutting Russia off from SWIFT, Western allies announced a series of other sanctions.

Russia’s central bank has foreign exchange reserves of about US$640 billion (S$866 billion), mostly housed in cities including New York, Frankfurt and London, according to the Washington Post.

It will also be targeted by deploying its international reserves in a way that “undermines the impact” of their other sanctions.

Targeted Russian elites

Two other sanctions target “persons and entities who facilitate the war in Ukraine and the harmful activities of the Russian government”.

Measures will be taken to limit the sale of citizenships in committed countries, which would allow a Russian linked to the Russian government to circumvent sanctions and gain access to financial systems.

A transatlantic task force will also be set up to identify and freeze the assets of sanctioned individuals and companies in their jurisdictions.

The allies will also work with other governments to detect and “disrupt the movement of ill-gotten gains”, and to deny them the ability to hide their assets in other jurisdictions around the world.

Countermeasures against disinformation campaigns and “other forms of hybrid warfare” will be strengthened.

“We stand with the people of Ukraine in this dark hour. Even beyond the measures we are announcing today, we are ready to take further steps to hold Russia to account for its attack on Ukraine.”

Image from the top of the White House on YouTube and via.

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