Payments system SWIFT to cut off Iranian banks

Belgium-based system will comply with EU rules, US pressure on Iranian banks; UAE stops handling Iranian rials.

March 15, 2012 18:19
1 minute read.
Iranian rial money exchange

Iran rial sanctions 390. (photo credit: REUTERS)

BRUSSELS - Belgium-based SWIFT, which facilitates the bulk of global cross-border payments, will on Saturday cut off Iranian banks blacklisted by the European Union over Tehran's nuclear program after an EU order and pressure from the United States.

SWIFT (Society for Worldwide Interbank Financial Telecommunication) said in a statement on Thursday it would disconnect Iranian financial institutions affected by the sanctions from its messaging system on Saturday at 1600 GMT.

"This EU decision forces SWIFT to take action," SWIFT Chief Executive Lazaro Campos said. "Disconnecting banks is an extraordinary and unprecedented step for SWIFT. It is a direct result of international and multilateral action to intensify financial sanctions against Iran."

The move followed a decision by the European Union Council, which represents EU member states, to tighten asset freezes on a number of people and entities associated with Iran's nuclear activities, which western powers think aim to produce a weapon.

"The Council agreed that no specialized financial messaging shall be provided to those persons and entities subject to an asset freeze," said the Council.

The announcements coincided with news that major money exchange houses in the United Arab Emirates - an important trading hub for Iran - have stopped handling Iranian rials over the last several weeks.

SWIFT, a member-owned cooperative, has been described as the "glue" of the global banking system, handling daily payments estimated at more than $6 trillion.

Expelling the sanctions-hit Iranian banks from SWIFT will shut down a major avenue through which Tehran does business with the rest of the world. That, the West hopes, will pressure Iran into curbing its nuclear activities.

While the United States and Europe accuse Iran of seeking to develop nuclear weapons, Iran maintains its nuclear program is for peaceful purposes.

Nineteen banks and 25 affiliated institutions from Iran exchanged a total of 2 million cross-border payments using SWIFT in 2010. They included banks the US accuses of financing Iran's nuclear program or terrorism - Mellat, Post, Saderat and Sepah.

SWIFT, founded in 1973, said its decision reflected the extraordinary circumstances of international support for the intensification of sanctions against Iran.

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