SWIFT: Society for Worldwide

Interbank Financial
Telecommunication
An Overview

Contents
About
Why is it important?
SWIFT Operations
Stakeholders of SWIFT
SWIFT offerings
Overview of Message types
Changes in SWIFT standards
Types of Changes in SWIFT Standard
Impact of Changes
References

About (1 of 2)
Society for Worldwide Interbank Financial Telecommunication
SWIFT was founded in Brussels in 1973
Headquarters are in La Hulpe, Belgium, near Brussels
SWIFT is a cooperative society under Belgian law and it is owned by its
member financial institutions
The chairman of SWIFT is Yawar Shah, who was born and raised in
Pakistan
The current CEO is Lzaro Campos, who is from Spain. Future CEO will be
Gottfried Leibbrandt, currently head of marketing

About (2 of 2)
Society for Worldwide Interbank Financial Telecommunication
Provides a network that enables financial institutions worldwide to send
and receive information about financial transactions in a secure,
standardized and reliable environment
SWIFT does not facilitate funds transfer
It sends payment orders, which must be settled by correspondent
accounts that the institutions have with each other
Physically SWIFT is just a combination of hardware, software, and people

Why is it important? (1 of 2)
The majority of financial institutions around the world are connected to
SWIFT. As of April 2012
Live countries

212

Live members

2,416

Live sub-members

3,330

Live participants

4,351

Total live users

10,097

6% 1%

Distribution

49%
44%

0%
Payments
Securities
Treasury
Trade
System

Markets Distribution Growth

Payments

49.40%

9.30%

Securities

44.00%

2.80%

Treasury

5.40%

-2.50%

Trade

0.90%

-1.10%

System

0.30%

-1.60%

Why is it important? (1 of 2)
SWIFT has become the industry standard for syntax in financial messages

Messages formatted to SWIFT standards can be read by, and processed by,
many well-known financial processing systems, whether or not the message
traveled over the SWIFT network
SWIFT is also registration authority (RA) for the following ISO standards:
ISO 9362: 1994 BankingBanking telecommunication messagesBank identifier codes
ISO 10383: 2003 Securities and related financial instrumentsCodes for exchanges and market identification
ISO 13616: 2003 IBAN Registry
ISO 15022: 1999 SecuritiesScheme for messages (Data Field Dictionary) (replaces ISO 7775)
ISO 20022-1: 2004 and ISO 20022-2:2007 Financial servicesUNIversal Financial Industry message scheme

In Conclusion: If you are a stakeholder in any kind of technology enabled financial

business, it is imperative to be at least familiar with SWIFT
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SWIFT Operations
SWIFT uses a distributed architecture for its operations

SWIFT messaging services are organized into two processing zones, the
European zone and the Trans-Atlantic zone, with pairs of operating centers
that store the traffic for each zone.
The SWIFT secure messaging network is run from two operational centers,
one in the United States and one in the Netherlands. SWIFT opened a third
data center in Switzerland, which started operating in 2009
Earlier, these centers shared information in near real-time. Post 9/11 and
other compliance requirements data from European SWIFT members was
no longer be mirrored to the US data center
On 1 August 2010, the EU-US Agreement "on the processing and transfer of
financial messaging data from the EU to the US for purposes of the Terrorist
Finance Tracking Program" has entered into force but SEPA data are not in
the scope of the EU-US agreement

Stakeholders (1 of 3)
Customers
Banks
Other Financial institutions (e.g. insurance companies, mutual funds,
hedge funds, pension funds)
Banking market infrastructures (e.g. Clearing and Settlement houses)
Broker/dealers
Corporates
Custodian banks
Investment managers
Securities market infrastructures (e.g. SEC, SEBI)

Stakeholders (2 of 3)
Shareholders (also the users of SWIFT)
Shareholder (Member)
An eligible organization holding a share in S.W.I.F.T. SCRL, including banks, eligible
securities broker-dealers and regulated investment management institutions
Details about SWIFT shareholding can be found in the SWIFT By-laws

Non-Shareholding Member
A Non-Shareholding Member is an organization which complies with the eligibility
criteria of a Shareholder (Member), and which has either chosen not to or is
prevented from becoming a Shareholder

Sub-Member
A Sub-member is an organization more than 50 percent directly or 100 percent
indirectly owned by a shareholder and which meets the criteria set forth for
shareholder
A Sub-member must be under full management control of the shareholder
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Stakeholders (3 of 3)
Management
CXOs, senior and middle management

Board of Directors

Corporations working for clients who are members/users of SWIFT

IT companies
Consultancies

In Conclusion: Any change in the protocol/directives of SWIFT will impact all the
stakeholders listed above

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SWIFT Offerings (1 of 4)
Messaging Service
This is the core and maximally subscribed service provided by SWIFT
SWIFT provides its messaging services through SWIFTNet which is an
application-independent, single window interface to all the connected
applications of all the institutions participating in the global financial
community
The communication protocols under SWIFTNet can be classified as:

FIN

FIN is SWIFT's core store-and-forward messaging service.

FIN value-added processing includes message validation to ensure
messages are formatted according to SWIFT message standards,
delivery monitoring and prioritization, message storage and
retrieval

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SWIFT Offerings (2 of 4)

FileAct

FileAct allows secure and reliable transfer of files and is typically used to
exchange batches of structured financial messages and large reports.
FileAct is particularly suitable for bulk payments (e.g. SEPA-DD), securities valueadded information and reporting, and for other purposes, such as central-bank
reporting and intra-institution reporting

InterAct

Designed to complement FileAct and FIN, InterAct can support tailored solutions
for market infrastructures, closed user groups and financial institutions.
InterAct is well suited to mission- and time-critical applications such as
Continuous Linked Settlement (CLS), SWIFTs Accord matching application or
real-time gross settlement systems (RTGS)
XML based and STP oriented

Browse

Based on the "https" internet standard protocol

Offers customers the capability to browse remote web servers using Alliance
WebStation
Easy integration in existing web servers
SWIFT supports a set-up in which service providers operate multiple web
servers for a service that end users can access through a single URL service
name
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SWIFT Offerings (3 of 4)
Messaging Service entails the following components:
Messaging standards: Every user of SWIFT has to comply with these
standards to be able to use SWIFT
Store and Forward mechanism of messages
To support the messaging service SWIFT put in several services:
3SKey - allows corporates to sign financial messages and files sent to their
banks
Bilateral Key Exchange (BKE) was used to authenticate messages and transmit
securely. It was replaced by Relationship Management Application (RMA) in
2009 to manage the business relationships between financial institutions
Alliance Kits contain the SWIFT software required to access SWIFT messaging
services: FIN, InterAct, FileAct and Browse

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SWIFT Offerings (4 of 4)
Value-added products and services
SWIFT offers some extra services to increase customer value:
Accord - Enabling real-time matching and exception handling for foreign
exchange, money market, OTC derivative, and commodity trade
confirmations
Liquidity risk management
Reference data of financial industry
Closed User Groups SCORE, MA-CUG
Support to SEPA, TARGET2
Web Platform
SWIFT Gateways
and several others

For detailed description and comprehensive list of products and

services, refer SWIFT website
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Overview of Message types (1 of 4)

SWIFT supports following message types: SWIFT MT, ISO 15022 MT, ISO
20022 MX
SWIFT messages, consist of five blocks of data: 3 headers, message content,
and a trailer

All SWIFT messages include the literal "MT" (Message Type). This is followed
by a 3-digit number that denotes the message category, group and type
Consider the following example, which is an order to buy or sell via a third
party: MT304
The first digit (3) represents the category. The category denoted by 3 is
Treasury Markets.
The second digit (0) represents a group of related parts in a transaction life
cycle. The group indicated by 0 is a Financial Institution Transfer.
The third digit (4) is the type that denotes the specific message. There are
several hundred message types across the categories.
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Overview of Message types (2 of 4)

Message Type

Description

MT0xx

System Messages

MT1xx

Customer Payments and Cheques

MT2xx

Financial Institution Transfers

MT3xx

Treasury Markets

MT4xx

Collection and Cash Letters

MT5xx

Securities Markets

MT6xx

Treasury Markets - Metals and Syndications

MT7xx

Documentary Credits and Guarantees

MT8xx

Travellers Cheques

MT9xx

Cash Management and Customer Status

For detailed list and description of each message type, you may refer
http://www.4alltrade.com/user/image/swift_categories_types_descriptions.pdf
http://docs.oracle.com/cd/E19509-01/820-7113/ahcbi/index.html
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Overview of Message types (3 of 4)

Within every message there are different fields marked by an
identifier:
Field (within colons ::) & Data

Explanation

:20:PLANT-12345

Senders Reference

:21R:PLTOL101-56

Customer Specified Reference

:50G:/1234567891
PLATUS33

Ordering Customer

:21:TR1-PL

Transaction Reference

:32B:USD118982,05

Currency/Transaction amount

:50L: PLANTOIL AXIM

Instructing Party

:57A:BBBBCNBJ

Account With Institution

:59:/60648929889
WUNG LU MANUFACTURING
23 XIAN MEN WAI AVE, BEIJING

Beneficiary

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Overview of Message types (3 of 4)

Illustration of use of different MTs

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Changes in SWIFT standards (1 of 3)

SWIFT introduces changes in its standards annually
The changes are proposed through a high level standards release
document 16 months prior to the go-live date of release
For the Nov 2012 implementation date, the initial document is released in
July 2011

The go-Live date is usually 17th Nov each year

The changes proposed in initial high level document are subject to
approval and rejection of country user groups and maintenance
working group (MWG)

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Changes in SWIFT standards (2 of 3)

After incorporating the suggestions and voting by country groups, the
final Standard Release Guide (SRG) is released in December of the
year prior to go-live
If any changes are made in SRG, the absolutely final SRG is released
in February
The High-level information and SRG are the reference documents
for technical implementers (e.g. IT companies supporting banking
Clients) and operational users to make suitable modifications to their
systems to make them compatible with new standards

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Changes in SWIFT standards (3 of 3)

Triggers of Changes

Improvement in technical features

Correction in technical features
Change in scope
Changes in regulatory requirements (e.g. stringent AML standards)
Improvement in integrity of messages (prevention of loss of or
modification to message content)
Making the information in messages more comprehensive and elaborate
Compatibility with other standards
Individual requests from customers
Introduction of new systems (e.g. e-Cheques)
Deletion of outdated standards
Change in industry standards [MT to MX (ISO 20022)]

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Types of Changes in SWIFT standard

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Source: High Level Information, Standards MT November 2012

Impact of Changes (1 of 2)
Biggest impact of changes in SWIFT standards is on the IS of SWIFT
users
because they have to modified to be made compatible with new
standards

Technical implementers (IT companies and consultancies) are

employed on a recurring basis to understand the impact of changes
in standards on IS and modify them suitably

Example: If new MT types are introduced or format is modified, the

gateways to SWIFT have to be altered and also all the other sending
and receiving systems of SWIFT messages have to be modified
This chunk has the maximum cost impact
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Impact of Changes (2 of 2)
Other impacts include:

Re-training of the personnel using SWIFT

Modification of transaction processes
Modification of Clearing and Settlement processes
Retrospective impact on existing databases

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References
http://www.swift.com/
http://en.wikipedia.org/
http://www.bis.org/

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