Inter-bank system to cut off Iran banks

Inter-bank system to cut off Iran banks
Kuwait Times – 18 February, 2012

SWIFT, the global interbank transfer network, said yesterday it was ready to exclude Iranian banks from its system once the EU has enacted new sanctions to that effect against Tehran. “SWIFT stands ready to act and discontinue its services to sanctioned Iranian financial institutions as soon as it has clarity on EU legislation currently being drafted,” the Belgium-based organization said in a statement. The United States and European Union have been tightening sanctions against Iran to force it to abandon its nuclear program, which they suspect has military aims.

Tehran insists the program is for peaceful uses. Washington has urged Brussels to block Iranian banks’ access to SWIFT, a cooperative of more than 9,000 financial institutions that serves as the main conduit for inter-bank transactions around the world. The EU is drafting new sanctions that would directly affect the ability of EU-based financial communication service providers such as SWIFT to do business with blacklisted Iranian banks, the organization said.

“This decision follows extensive consultation with our board and with relevant regulatory authorities,” it said. “The decision also reflects the extraordinary and highly exceptional circumstances of significant multi-lateral international support for the intensification of sanctions against Iran.” The US Senate’s banking committee has endorsed similar legislation.

“The responsibility of SWIFT with regard to international financial sanctions has always been to assist our member banks in meeting their responsibilities to comply with national and international regulation,” the statement said. “SWIFT is and has always been in full compliance with applicable sanctions regulations and has received confirmation of this from the competent regulatory authorities.”

SWIFT said it has informed its overseers-worldwide central banks including the US Federal Reserve, Bank of Japan and European Central Bank. Evicting Iran from SWIFT would further cripple the country’s financial flows but could shock the global financial system at a time of rising risks to economic growth, mainly due to the euro-zone debt crisis.

The escalating tensions between the West and oil-rich Iran, including an EU ban on Iranian oil imports, have helped push oil prices higher. The US Treasury’s sanctions chief David Cohen raised the SWIFT issue in talks in Brussels earlier this month, a US official said Thursday. “While there he discussed the issue of SWIFT providing services to designated Iranian banks and urged the EU to take action on the issue,” said the official, who spoke on condition of anonymity.

The central bank of sanctions-hit Iran in late January acted to enforce a single exchange rate after a dramatic slide in the value of the Iranian rial on the open market amid escalating Western banking sanctions. Sanctions had sharply reduced its foreign reserves, forcing the central bank in November to halt its policy of massive injections of dollars into the open market to support the rial.