How to Connect to SWIFT

SWIFT has made it easy to connect to its messaging platform by introducing SWIFT Alliance Lite. You can now become a SWIFT member without any setup fees and at a monthly cost as low as EUR 200.00.

What is SWIFT?

SWIFT or the Society for Worldwide Interbank Financial Telecommunications is an international banking transaction organization with its headquarters in Belgium. Besides the headquarters, the branch offices of SWIFT are located in all major financial centers around the world. SWIFT defines itself as a ‘member-owned’ co-operative that provides the financial world to secure its business transactions with ‘speed’ certainty and confidence’.

This member-owned co-operative ‘society’ performs solely as the neutral carrier of financial messages from one member country t o another. The Belgium based company does not manage any funds or accounts of their customers, nor do they hold any sensitive financial information on a permanent basis. This neutrality of SWIFT enables it to be a catalyst of money transactions without being part of any controversy that can arise in the process of money transactions. SWIFT considers itself a ‘data-carrier’ that interconnects financial institutions with credible data.

The importance of SWIFT is immense in the world of online bank transactions, which demands speed, and fast clearance of bank regulatory authorities for international transactions. What that means is that in today’s world where business agreements are finalized over teleconferencing and emails, the transaction of money from one country to another (or more precisely, from one banking system to another banking system) should  be fast and credible. This is where the service of SWIFT comes in. [i] The membership of SWIFT extends to over 8,300 international banking organizations, international securities institutions and Corporate customers of 209 (as in February 2010) countries all over the world. The transactions of SWIFT started in 1973 with the collaboration of 239 banks in 15 countries all over the world.

Functions of SWIFT

SWIFT defines its functional aims in a two-fold objective.

The first objective of the society is to offer a communications platform for the international money community to interconnect via money transactions from one country to another. The products and services of SWIFT (like the Alliance Lite) are designed and directed towards providing an enhanced sense of security and reliability. In fact, in the SWIFT member countries around the world, the presence of a SWIFT code at the bank is considered as a strong reference of the bank’s credibility in international money transactions.

The second function/objective of SWIFT is to act as a neutral catalyst in connecting the financial institutions of different countries to develop new patterns and paradigms that eventually shapes the international money practices and defines standards for such international money transactions.

By the pursual of this twofold objective, SWIFT ensures that there is an effective dissolution of international monetary issues towards solutions of mutual interest. Also, since SWIFT is an international financial data transfer organization, it plays an effective role in creating new international business opportunities and new revenue streams. This particular feature of SWIFT, namely the creation of new revenue streams has also helped the company to earn credibility and popularity among the various government administrative bodies of the countries where SWIFT is functional.

SWIFT governance and organizational structure

The governance of SWIFT is entrusted upon a board of 25 independent directors who are elected by the shareholders of the company. The Chief Executive Officer of the SWIFT governing body heads an executive committee that employs full time employees to manage and organize the daily transfer of financial data through SWIFT. [ii]

Since SWIFT is an international financial data transfer society, so it recognizes the need of being overseen by Central banks and other equivalent financial institutions of the countries where SWIFT is functional. Since the company started with its headquarters in Belgium, so the Belgian Central bank is the main overseeing body of SWIFT. Along with the National Bank of Belgium (NBB), the central banks of 10 other countries are also entrusted with the task of overseeing SWIFT transaction details. This group of 10 countries that have agreed to oversee the SWIFT activities are collectively known as the G10 countries. The participating banks of the G10 conglomeration are the Bank of Canada, Deutsche Bundesbank, European Central Bank, Banque de France, Banca d’Italia, Bank of Japan, De Nederlandsche Bank, Sveriges Riksbank, Swiss National Bank and Bank of England. Apart from the NBB and the G10, the US banking system is represented by the Federal Reserve System. The Federal Reserve System is a merger of the Federal Reserve Bank of New York and the Board of Governors of the Federal Reserve System.

However, there is an important point to note in this respect. As previously mentioned, since SWIFT does not hold the financial responsibilities of the participating companies, the Central banks of the G10 countries do not have a regulatory sway over the SWIFT operations structure. SWIFT, with its neutrality, thus exists as an individual agent whose sole objective is to standardize and establish connections between different international financial institutions.

SWIFT co-operates with its lead overseer (NBB) through an interdependent process of moral suasion that is based in its entirety upon an ‘open and constructive’ dialogue between the SWIFT board of directors and the overseeing authorities (G10, specifically NBB).

The SWIFT –NBB relation is based upon a protocol signed by the two parties that decides the limitations and the directions of the ‘open and constructive’ dialogues between the two. This basic protocol is revised periodically in the directions of resolving any conflicting issues that may arise in course of the dialogues.

Mutual trust has been accepted as the very basic parameter of deciding the consultations between SWIFT and the overseeing authorities, primarily the NBB.

The NBB or the National Bank of Belgium is the main overseer of the SWIFT data transfer system and it serves as the entry point of the other G10 bank authorities in issues pertaining to the functioning of SWIFT in their respective countries. [iii]

The limits of the overseers access to SWIFT information is decided by the protocol signed between the NBB and the SWIFT. Typical sources of information provided by SWIFT to the overseeing authorities are the security audit reports, the SWIFT board papers, the several incident reports and the incident review reports.

Apart from this, the SWIFT executive team also furnishes necessary information through presentations by a SWIFT team.

The NBB maintains its transparency in the overseeing functions by publishing the complete oversight role of the NBB in the Financial stability review available at the bank’s official website www.nbb.be.

ALLIANCE LITE

With its objective of simplifying the interaction of customers with the company, SWIFT introduced the Alliance Lite in 2008. The Alliance lite can be described as an internet based USB connectivity device that lets the users to directly connect with the SWIFT network without any need of installing any additional software programs on the user end system. The Alliance lite system was formally launched in the Sibos 2008 in Vienna. This hardware device allows the end user to directly access the SWIFT systems via a secure channel that confirms the validity of the data transaction through the Alliance lite server on SWIFTnet. [iv]

The effectiveness of this USB device can be described as being a low cost access to a host of benefits. The benefits of Alliance Lite are described in a point wise manner by the following points.

  1. Easy technology: Alliance lite is a simple USB port device that works via Internet Explorer web browser on a conventional Windows PC. Since this is the commonest system configuration requirement, the universality of Alliance lite and its common usage by the participating parties is ensured. Moreover, the lite USB system also allows back office manual integration of the system.

The manual operations of Alliance lite supports the manual message entry/ repair, display, message sorting, message reporting and searching through the SWIFT registered financial data of your concern.

Alliance lite also serves the function of automation via Autoclient, a lightweight integration software that is an optional component of Alliance Lite. Auto client enables automatic sending of acceptance and delivery notification messages via the SWIFT Net server. This optional Alliance lite automation component enables the file input and output type of any FIN message type (from MT101 to MT 999), ISO 20022 fund MX messages as well as entire business files.

To get the service of Autoclient, you will just need to prepare your financial messages and files and then place these inside a predefined directory of the user end PC connected with Alliance lite. Autoclient automatically picks up these messages from the directory and sends them to SWIFT. The process is completed by sending a delivery notification from the SWIFT server to your PC, so that you know your messages has reached their destination securely.

Alliance Lite supports all the commonest messaging formats like the MS word, MS excel, CSV and PDF. The inbuilt templates system of the product allows you to type frequently repeated instructions only for once. From the second time, you will find a template at your service making your work faster and easier.

  1. Single product to connect all business counterparts: Since Alliance Lite can be easily used by anyone and everyone, so it serves the SWIFT basic purpose of providing a common platform for financial transactions. Therefore, Alliance lite connects corporate, financial institutions (banks), funds distributors, the fund transfer agents and the investment managers. [v] As you decide to avail the services of Alliance Lite, you automatically become a part of the SWIFT network, presently comprised of 8,600 international banking organizations spread over 209 countries.
  2. Several features to handle your transactions: The Alliance Lite is rich in features to handle effectively your financial transactions. First of all, you obtain your own SWIFT BIC code that is recognized as a standard banking code in all the countries where SWIFT money transactions are permitted.

Besides, the Alliance lite also offers the user the features of an inbuilt BICPlusIBAN directory, a support for the FIN copy, an intraday multi-bank cash reporting feature and a long term archiving of your audit reports.

The simple GUI (Graphical User Interface) has been designed to provide simplicity in the transactions.

  1. Security: The fact that Alliance Lite directly connects you to the SWIFT network is a proof that your financial transaction data is encompassed by the reputed SWIFT security system. Apart from this, there are also other additional security features.

The additional security features include a digitally signed tamper proof hardware security token for all sensitive actions through the Alliance lite. A four-eyes approval provides you with the necessary controls that you need before releasing a financial transaction. [vi]

  1. Training: Although Alliance lite is a user friendly device, yet it requires simple training to go through the different features of it. The Alliance Lite training modules, CD roms and documents are included in t he Alliance lite package that you obtain after ordering alliance Lite from SWIFT.

Cost and ordering

Since Alliance lite has been released as a low cost solution to the banking requirements of the clients, so the pricing and ordering section deserves special mention. SWIFT offers alliance lite in two different payment models. The billings of both the payment models are performed on a monthly basis.

  • The first payment model is a flat 850 EUR fee per month, for a total of 4,000 data transactions per month. Above the 4000 limit, any extra data is charged at 1 EUR per item.
  • The second payment model is a pay as you use system. You are required to pay a monthly 200 EUR for availing the services of Lite. 1 EUR is charged for per item sent or received.

(A single item, as described above, is 1 MT or MX message, or 1 File Act file chunk of 100Kb. If the data volume exceeds 100Kb then it is considered more than item.)

On ordering Alliance LIte from SWIFT, you are given a package. This package includes a set of 10 USB hardware security tokens, SWIFT user handbook document, Auto lite integrated software, Alliance lite user document and training modules and documents for handling Alliance Lite.

The subscription offer for ALLIance Lite is 1 year. The subscription can be easily renewed after one year. [vii] Alliance lite has been made available as a simple one stop shop ordering.

Alliance lite and Bottomline technologies

Bottomline technologies, an international organization to facilitate collaborative payments, announced their partnership with SWIFT alliance Lite at Sibos 2009. Bottomline’s partnership with SWIFT has been based upon the agreement that the company will facilitate the propagation and acceptance of  Alliance Lite by financial institutions and corporates associated with the company. As per the agreement, Bottomline will also provide elucidation [viii] of the different features and the payment models of Alliance LIte to the associated companies and provide a payment automation platform for the functioning of Alliance Lite. [ix]

References


[i] http://www.swift.com/about_swift/company_information/index.page?lang=en

[ii] http://www.swift.com/about_swift/company_information/governance/governance_at_swift.page?

[iii] http://www.swift.com/about_swift/company_information/governance/oversight_of_swift.page?

[iv] https://www.swiftcommunity.net/communities/145/blogDetail/17325

[v] http://www.swift.com/solutions/connectivity/connectivity_products/alliance_lite/index.page?

[vi] http://www.swift.com/solutions/connectivity/connectivity_products/alliance_lite/detailed_features.page?

[vii] http://www.swift.com/solutions/connectivity/connectivity_products/alliance_lite/pricing_and_ordering.page?

[viii] http://www.bottomline.com/bank_solutions/IA_Demystifying_Alliance_Lite_for_Banks.html

[ix] http://www.bottomline.de/news/pressemitteilungen/swift-al.html

The Offshore Banker is not affiliated with SWIFT and any trademarks used in this article are the properties of their respective owners.

 

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