Months of geopolitical spats that spanned Europe, the Middle East and the United States have seen payments infrastructure at the center of it all.
This week SWIFT, the financial messaging service based in Belgium (and where the acronym stands for the Society for Worldwide Interbank Financial Communications) said that it would suspend access for at least some Iranian banks. It made the decision, according to a statement, “in the interest of the stability and integrity of the wider global financial system.” SWIFT said the decision was a “regrettable” one.
That decision came after the U.S. brought back financial and other sanctions against Iran, which in turn came after the U.S. backed out of a nuclear deal struck in 2015 that aimed to stop Iran’s missile and nuclear programs. U.S. Treasury Secretary Steven Mnuchin had said that sanctions in turn might be served on SWIFT itself if it worked with the roughly 50 banks that had been listed as under sanction. SWIFT, as has been widely reported, facilitates cross-border transactions tied to more than 11,000 banks around the globe. The idea is that by cutting off Iran’s banking system to the money transfer and flow of funding information, financial pressure may lead to economic pressure on Iran, enough so that its government comes to the negotiating table again.
The moves had been widely telegraphed, and are now here. As has been reported in this space and elsewhere, tensions over payments infrastructure have been brewing since the summer. A number of prominent voices in Europe — among them Germany’s finance minister — have called for a parallel payments system that would operate, presumably, beyond the scope of U.S. political influence.
We’ve been here before, it seems, where the U.S. cuts off Iran’s access to the financial system and various other parties and methods try to make an end run around penalties that might loom if entities choose to do business with Iran. In 2012, SWIFT cut off access to Iranian banks in 2012, upon sanctions levied by the Obama administration. They were reconnected in 2016.
Iran said this week through Abdolnaser Hemmati, who helms the nation’s central bank, that “we have been in talks with our trade partners and all the necessary actions have been taken for Iran’s interactions to continue. We were expecting these sanctions, so we had plans in place for them and beyond … considering the possibility of banks being disconnected from SWIFT we have considered alternatives to replace it.”
Central Banks, Eyeing Cash
In other central banking news, Sweden’s central bank has stated that it wants to see all banks in the nation to be “obliged” to handle cash, as reported in various news outlets, even as the nation seeks to move toward cashless transactions.
As reported by the Irish Examiner, a committee is reviewing central bank laws that would require larger FIs to work with cash transactions. Riksbank Governor Stefan Ingves said that such plans could “go a step further. It’s our opinion that all banks and other credit institutions that offer payment accounts shall be obliged to handle cash.” Riksbank has said that banks should make sure that individuals be allowed to make cash deposits. Bankomat, which is a Swedish ATM provider, said that the committee examining the proposal should give the central bank responsibility for overseeing the presence of cash across Sweden, including infrastructure concerns. The push for cash comes as the country moves to embrace new payments infrastructure tied to faster payments, through an initiative titled P27.
Separately, Citizens Bank said this week that it will debut real-time payment services for corporate customers as soon as next year. Following the corporate rollout, the bank will bring to market real-time offerings to its commercial online platform and application program interface and file transmissions.