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Financial Sanctions, SWIFT, and the Architecture of the International Payments System

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Abstract

Financial sanctions, alongside economic sanctions, are components of the toolkit used by governments as part of international diplomacy. The use of sanctions, especially financial, has increased over the last seventy years. Financial sanctions have been particularly important whenever the goals of the sanctioning countries were related to democracy and human rights. Financial sanctions restrict entities—countries, businesses, or even individuals—from purchasing or selling financial assets, or from accessing custodial or other financial services. They can be imposed on a sanctioned entity’s ability to access the infrastructures that are in place to execute international payments, irrespective of whether such payments underpin financial or real activity. This article explains how financial sanctions can be designed to limit access to the international payments system and, in particular, the SWIFT network, and provides some recent examples.

Suggested Citation

  • Marco Cipriani & Linda S. Goldberg & Gabriele La Spada, 2023. "Financial Sanctions, SWIFT, and the Architecture of the International Payments System," Staff Reports 1047, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:95525
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    References listed on IDEAS

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    1. Marieke De Goede, 2012. "The SWIFT Affair and the Global Politics of European Security," Journal of Common Market Studies, Wiley Blackwell, vol. 50(2), pages 214-230, March.
    2. Susan V. Scott & Markos Zachariadis, 2012. "Origins and development of SWIFT, 1973--2009," Business History, Taylor & Francis Journals, vol. 54(3), pages 462-482, June.
    3. Gabriele Galati, 2002. "Settlement risk in foreign exchange markets and CLS Bank," BIS Quarterly Review, Bank for International Settlements, December.
    4. Gary Clyde Hufbauer & Jeffrey J. Schott & Barbara Oegg, 2001. "Using Sanctions to Fight Terrorism," Policy Briefs PB01-11, Peterson Institute for International Economics.
    5. Tara Rice & Goetz von Peter & Codruta Boar, 2020. "On the global retreat of correspondent banks," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

    1. Mikhail Mamonov & Anna Pestova & Steven Ongena, 2023. "'Crime and Punishment'? How Banks Anticipate and Propagate Global Financial Sanctions," Swiss Finance Institute Research Paper Series 23-59, Swiss Finance Institute.

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    More about this item

    Keywords

    sanctions; Financial sanctions; cross-border payments; SWIFT; Russia-Ukraine war;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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