SWIFT Gets Caught


But does it get punished?

Marcus Noland (PIIE)



For some time, a story has been circulating among North Korea watchers that the Society for Worldwide Interbank Financial Telecommunications (SWIFT), a Belgian-based global interbank messaging service, had been busting UN (and US) sanctions by conducting financial transactions with sanctioned North Korean banks. Indeed, there was a certain amount of bitterness to these discussions, insofar as it was claimed that SWIFT was breaking the law, but had managed to do enough lobbying to avoid censure. Last week, the UN Panel of Experts substantiated the rumors. (Kudos to Josh Stanton for being the first out of the gate on this one.) SWIFT told the press that four of the North Korean banks had voluntarily withdrawn from the network late last year, and three more were recently banned at the request of Belgian authorities.

The story, filled with numerous subplots, might be titled The Triumph of Greed. It is clear that SWIFT knew who they were dealing with, but when caught out lamely claimed that they were a “global utility” and as such could turn no one away. As it explained in a statement to the Wall Street Journal:

“As a global utility designated as a critical service provider, Swift has no authority to make sanctions decisions,” the company said. “Any decision to lift or impose sanctions on countries or individual entities rests solely with the competent government bodies and legislators.”

Well, at least they didn’t claim that they were a “global charity.”

When it became apparent that the PoE had the goods, the Belgian government, which had reportedly approved the breach in UN sanctions by granting special authorizations for the transactions, reversed itself, citing “the current international situation,” according to SWIFT.  (The Belgian Finance Ministry isn’t talking.) The UN claimed that it was the only competent authority for determining if a special exemption was warranted, while a spokesperson for the European Union issued a bland blanket statement that the EU’s method of handing out exemptions was “consistent with those of the UN” but declined to address any of the specifics of the case.

What’s really odd about this case, is that it is widely believed that North Korea was linked to the hacking of the SWIFT network last year. Talk about feeding the hand that bites you.

Well, at least they didn’t claim that they were a “global charity.”

That said, the amount of money involved appears to be quite small: transactions of less than €15,000, generating fees in the hundreds of euros for SWIFT. But these reported violations may only be the tip of the iceberg: ominously, the PoE observes that “in addition to SWIFT fees, banks of the Democratic People’s Republic of Korea pay separate fees to a third-party ‘service bureau’ located outside of European Union jurisdiction in order to connect to the SWIFT network, which would also be a violation of the asset freeze.” In short, for small transactions go through the proper channels. But if you want to do something really shady, work through a third-country front.

I have a feeling this is not the last we have heard of this story.

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