Swift shows impact of Iran dispute on international business

By Ali Ragab

It is a mid-sized Belgian business that oils the wheels of global finance from a tranquil lakeside south-east of Brussels, across the road from a 19th-century château.

But the peaceful existence of the Society for Worldwide Interbank Financial Telecommunication — better known as Swift — has been ruptured by a transatlantic battle over the Iran nuclear deal.

President Donald Trump’s reimposition of nuclear sanctions on Tehran poses a direct challenge to the business model of Swift, a company that bills itself as an internationally available, politically neutral “utility”.

As the EU prepares measures to respond to the US move, Swift provides an acute example of how companies risk being caught in a transatlantic squeeze, and how the dispute might trigger wider fallout for international business.

Mr Trump reactivated the US sanctions against Iran last month when he pulled Washington out of the landmark 2015 nuclear accord with Tehran. Unless Swift wins an exemption, it will be required by the US to cut off targeted Iranian banks from its network by early November or face possible countermeasures against both its board members and the financial institutions that employ them.

These could include asset freezes and US travel bans for the individuals, and restrictions on banks’ ability to do business in the US.

Swift’s very survival as a worldwide system for facilitating cross-border payments depends on it resisting such attempts to “weaponise” it for political ends, said Nicolas Véron, senior fellow at the Peterson Institute for International Economics.

“The Europe-US-Iran issue is existential for Swift as a global network,” he said of the action against the company, which is owned by about 2,400 banks and other financial institutions.

Born in the 1970s out of leading banks’ desire to replace clunky Telex messages with a more reliable and faster payment system, Swift is now part of the world’s financial plumbing. Its 11,000-strong network of users expects the pipes to stretch as far and wide as possible.

The company runs a gigantic secure messaging service for the world’s financial institutions, transmitting payment requests across its electronic platform and keeping a record of such communications on servers in Europe and the US. It handles over 6bn messages a year.

Its role and dominance make Swift a very unusual company: a technology business that is systemically important for global commerce but that does not directly handle payments and whose turnover is a tiny fraction of that of a large bank. Its 25-member board of directors resembles a United Nations of executives specialised in the more prosaic side of banking: experts in payments processing, trade finance and interbank relations.

The Iran deal fallout is part of a post-millennium pattern of Swift becoming caught up in political fights. In 2006, EU lawmakers were outraged by revelations of a secret “Terrorist Finance Tracking Programme” that allowed investigators to tap Swift data held on a server in the US.

The company was also at the centre of international tensions in 2012, when it was ordered by the EU — following a US initiative — to disconnect from Iranian banks that were the subject of sanctions. These measures were later suspended in 2016 after the nuclear deal came into effect.

But Swift has fought back publicly against the idea that access to its services should be used to punish or reward governments.

The rows showed how it has become a sensitive asset: a gateway to the global finance system that comes under Belgian and European oversight but which have become of great interest to US authorities.

Swift’s global role is highlighted by its purpose-built headquarters, set amid manicured lawns and a miniature forest where deer and pheasants roam.

The neoclassical building houses just under 1,000 employees from about 50 countries and is the base for Swift’s central management. This is where internal cyber security and physical security experts duel: “red” teams probe for weaknesses in the system against “blue” opponents whose job is to defend its integrity.

The data centres themselves are in the Netherlands and the US state of Virginia, with a back-up in Switzerland. There are also emergency recovery sites whose location Swift does not disclose.