Slower payment traffic to and from Russia without SWIFT

If a number of Russian banks are removed from the SWIFT international payments system, what does this mean for companies in the Netherlands that have Russian customers or suppliers? Find out and what you can do without SWIFT.

The European Commission disconnected 7 Russian banks from the SWIFT network on 12 March 2022. The banks disconnected are VTB Bank, Novikombank, Rossiya Bank, Vnesheconombank (VEB), Promsvyazbank, Sovcombank, and Bank Otkritie. Russia's largest bank Sherbank was added to the list in the EU's 6th sanction package on 2 June 2022. Disconnected from SWIFT, the technical security controls between banks are no longer in place. It is also not possible to pay with a Letter of Credit (L/C) via banks that are disconnected from the SWIFT system.

What is SWIFT?

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. The organisation was created in 1973 by American and European banks. SWIFT is a communication system between banks to speed up and facilitate international payments.

Faster and easier payments

Before SWIFT, an international payment had to pass through a bank that mediated between two banks in different countries. This was known as an intermediary bank. The banks communicated with each other, often by telex communications, before transferring money to each other. SWIFT made it possible to connect various international banking systems. From then on, international payments were faster and easier.

A technological solution

The SWIFT system itself does not make payments. Instead, it provides users with the necessary information to make a foreign payment. With SWIFT, users have the guarantee that an announced transaction actually takes place. If, for example, you make payments to Russia, the SWIFT system provides tables with the details of the Russian recipient. If the Russian tables are removed from SWIFT, the system cannot make a connection. Without this control system, you cannot make or receive payments with an automatic guarantee.

Doing business with Russia

You can still do business with customers and suppliers in Russia. However, please take the various sanctions into consideration. A number of sanctions have already been in place against Russia since 2014. More sanctions are now being added because of the February 2022 invasion of Ukraine. The Dutch Government has an FAQ available about the situation in Russia and Ukraine. The Russia Business Desk (in Dutch) also answers questions about the sanctions.

SWIFT Payments

The Dutch Payments Association and the Dutch Banking Association advise for the time being not to make payment transactions with any company, organisation or person in Russia. Contact your bank before making such a transaction. Your bank will explain the risks and help you make an informed decision.

International payments without SWIFT?

You can still transfer money internationally without SWIFT. To do so, your bank will use older communication methods to process your payment. The automatic guarantee of paying and receiving payments is absent. This has to be resolved manually, meaning banks must call or email each other. For example, a bank must check with the other bank if the account holder exists, agree upon the currency, and check that the account number is correct.

This makes international payments more difficult, slower and uncertain. And trust in your foreign relationship becomes even more important. Contact your bank and discuss the best way to arrange this, and consider alternative payment methods (in Dutch).

More information

Do you have questions about doing business with partners or customers in Ukraine or Russia? Contact a Netherlands Chamber of Commerce KVK advisor via telephone number 088 585 22 22.