SWIFT Operations – Overview

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Understanding SWIFT
▪ SWIFT – When
▪ SWIFT – What
▪ SWIFT – Where
▪ SWIFT – Who
▪ SWIFT - How

2
SWIFT – When?
1973 ✓ Founded by 239 Banks in 15 Countries

✓ First Message Transmitted through SWIFT by Albert, Prince of Belgium

1977
✓ 518 Members in 22 Countries – 3.4 Million Messages

1978 ✓ First 10 Million Message – 586 Members – 25 Countries

1983 ✓1000 Members in SWIFT Community – 52 Countries – 104 Million Msg

✓ Non Banking Financial Inst. - Securities & Money Market Participants

1987
included as SWIFT Members

1993 ✓ 100 Countries – 2 Million Messages Daily

2001 ✓ TCP/IP Based Transmission – SWIFTNet goes LIVE

✓ SWIFT MT 103 Replaces MT 100 (customer Payment Message)

2003

2001 ✓ TCP/IP Based Transmission – SWIFTNet FIN, InterAct, FileAct Introduced

2006 ✓ Corporate included as SWIFT Member

2007 ✓ 208 Countries – 8282 Members – 3 Billion Messages (YTD)

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SWIFT – What?
▪ Secured Global Messaging: SWIFTNet -
Secure Global Messaging  FIN – Transaction Specific Messaging Service
 FileAct – Exchange of Files between parties
 InterAct – Request/ Response Message
 Browse – Secured Direct Access to SWIFTNet

▪ Trusted Third Party

 Interactive & Real time Networking Services for
Market Infrastructures (CLS, SEPA etc.)

SWIFT ▪ Standards
 246 FIN Message Types (ISO 7775 & 15022)
 Registering Authority for ISO 20022

▪ Support
 24 by 7, 365 Days round the globe

Support ▪ Information Service

 BIC Database Plus, BIC-IBAN Directory

▪ Interfaces
 SWIFTAlliance, SWIFTNet ACCORD, Exceptions
& Investigations, Proxy Voting etc

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SWIFT – What?

▪ SWIFTNet FIN Messages allocated to different Markets

▪ Payments
 Cat 1 Customer Payments and Cheques
 Cat 2 Financial Institution Transfers
 Cat 8 Travellers Cheques
 Cat 9 Cash Management & Customer Status
 FIN-Copy MT 012 + MT 096
▪ Securities
 Cat 5 Securities Markets
▪ Treasury
 Cat 3 Foreign Exchange, Money Markets and Derivatives
 Cat 6 Precious Metals and Syndications
▪ Trade
 Cat 4 Collection & Cash Letters
 Cat 7 Documentary Credits & Guarantees
▪ System
 Cat 0* System messages
* Excluding FIN-Copy messages: MT 012 + MT 096
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SWIFT – What?
SWIFTNet FIN total traffic & SWIFTNet FIN traffic
distribution by market distribution by region

▪ Payments - 52.4% ▪ Europe - 65.1%

▪ Securities - 39.5% ▪ Americas - 19.4%
▪ Treasury - 6.4% ▪ Asia Pacific - 11.7%`
▪ Trade - 1.4% ▪ Africa - 2.5%
▪ System - 0.4% ▪ Middle East - 1.3%
Year to Date – Oct 2007 – Source: www.swift.com
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SWIFT – Where & Who?

▪ Where
 Headquarter - La Hulpe, Belgium
 Operating Centers - Netherlands & USA
 Customer Support Center –Netherlands, USA, Hong Kong, Japan
▪ Who
 Members – (2281) Banks having Shareholding with SWIFT
 Sub-Members – (3196) Banks Owned by Member Banks
 Participants - (2805) Non Banking Financial Institutions like
- Investment Management Institutions
- Securities Brokers & Dealers
- Central Depositories & Clearing Organizations
- Recognized Stock Exchanges
- Registrars & Transfer Agents
- Money Brokers
- Issuers of Travelers Cheques
- Domestic Clearing Participants

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SWIFT – Who?

▪ Identification
 Identified by BIC - Banker Identification Code
 Structured Addressing
 Clearly identifying the partner in the Financial Transaction
 Enables Automated & Straight Through Processing
 Registration Authority for ISO 9362

▪ Structure – 4!a2!a2!c[3!c]
 4!a - Bank Code (Unique to each Institution)
 2!a - Country Code (ISO Code)
 2!c - Location Code
 3!c - Optional Branch Code

SWIFT BIC – Registered and Connected to SWIFT

Non-SWIFT BIC – BIC of a Financial Institution not Connected to SWIFT
BEI – Business Entity Identifier for Non-Financial Institutions

a – Alpha Characters c – Alpha Numeric Characters

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SWIFT – How?
Networking Architecture
System
▪ Customer Interface
Control
Processor  Link to SWIFT Network at the Customer
Level
▪ Communication Network
Slice Slice
Processor Processor

 International Communication Web Link

Regional Regional Regional Regional Regional
Processor Processor Processor Processor Processor ▪ Message Processing System
 Centralized Data Processing System
 Network Monitoring
 Validations & Message Routing
Secured IP
▪ System Control Processor
Network
(SIPN)  Controls access to Service
 Does not process Financial Messages
▪ Slice Processor
▪ Handles Routing & Safe Storage of Messages
▪ Generation of Delivery Notification & No
Delivery Warning Messages
▪ Regional Processor
▪ Logical Entry & Exit point for FIN Service
SCP – System Control Processor ▪ Message Validation & ACK/NAK generated
SP – Slice Processor
▪ Output Message Queuing & processing
RP – Regional Processor
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Elements of SWIFT FIN Message
▪ SWIFT – Secure Message Exchange
▪ SWIFT – Types & Structure of FIN Messages
▪ SWIFT – Block Structure
▪ SWIFT – Message Flow & Acknowledgement
▪ SWIFT – Validation
▪ SWIFT – Storage, Retrieval & Broadcast
▪ SWIFT – Test & Training Mode
▪ SWIFT – FIN Copy
▪ SWIFT – FINInform
▪ SWIFT & ISO Standards
▪ SWIFT – FIN Standard Release

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SWIFT – Secure Message Exchange

SWIFT Message Exchange ensures Confidentiality, Integrity, Availability and

Accountability.

▪ AT User Level ▪ Between User & User

 Access to Terminals  Authentication
 Roles & Responsibilities  PKI Encryption

▪ AT SWIFT ▪ Between User & SWIFT

 Validation  Access Control
 Storage  Encryption
 Encryption  Message Sequencing
 Checksum  Checksum
 Physical Security

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SWIFT – Types & Structure of FIN Messages
▪ Message Type:
▪ User to User Message:
 Category 1 – 9
 Message exchanged between Users to
process Financial Transactions
 Message Types identified by 3 Digit
Numerical Number
 First Digit – Category of the Message
 Second Digit – Message Group
 Third Digit – Type of Message
▪ System Message:
 Category 0
 Message exchanged between SWIFT System
and Users
 Delivery Notifications, Retrievals etc
▪ Service Messages:
 Message sent from SWIFT System to Users
mainly for Communicating System
commands
 LOGIN, SELECT, LOGOUT, ACK, NAK etc
▪ Message Structure:
▪ Confirms to a defined Block Structure
▪ Contains 5 Blocks
▪ Data specific to the Block
▪ Start & End with a Curly Bracket
▪ Blocks are numbered followed by a Colon
▪ Typical FIN User to User Message consists of:
{1: BASIC HEADER BLOCK}
{2: APPLICATION HEADER BLOCK}
{3: USER HEADER BLOCK}
{4: TEXT BLOCK
{5: TRAILER BLOCK}
▪ Block 1 to 3 contains Header Information
▪ Block 4 contains the text of the Message
▪ Block 5 contains Trailer Information
▪ Block 3 & 4 contains sub block
▪ Block 1 is mandatory for all messages
▪ Presence of Block 2 – 5 is optional & depends on
nature of Message
▪ All FIN User to User Message contains Block
1,2,4,5
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SWIFT – Block Structure
▪ Header Block
 Block Identifier
 Application Identifier
 Service Identifier
 Sender Address
 Receiver Address
 Input / Output Direction
 Message Type
 Message Priority
 Delivery Monitoring
 Message Input Reference
 Banking Priority
 Message User Reference
▪ Trailer Block
▪ Control Purposes
▪ Special/Additional Information
▪ Contains sub block like
 CHK - Checksum
 MAC – Message Authentication Code
 TNG –Training
 PDE – Possible Duplicate Emission
 PDM – Possible Duplicate Message
 DLM – Delayed Message
▪ FIN Message Length
▪ 2000 Characters or
▪ 10000 Characters
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SWIFT – Message Flow & Acknowledgement

▪ For Input Messages

▪ ACK:
 Positive Acknowledgement sent by the
System.
 Message Accepted for onward
Transmission
Input Message SWIFT Output Message
▪ NAK:
 Negative Acknowledgement sent by
the System.
 Notifying the rejection of the message
indicating the reason of rejection with
error code

▪ For Output Messages

▪ UAK:
ACK / NAK UAK / UNK
 Positive User Acknowledgement sent
by CBT to SWIFT.
 Confirm safe receipt and acceptance
▪ UNK:
SWIFT messages move from one node  Negative User Acknowledgement sent
by CBT to SWIFT.
to other in Store & Forward Method  Notifying the rejection. (Eg: Wrong
Checksum)

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SWIFT – Validation

▪ All Input Messages are Validated by SWIFT Network

 Syntax
 Semantics
 Checksum
 Conformity for the Format Specification for the Message Type
 Message Usage Restrictions of a Message User Group (MUG)

▪ Sender gets Negative Acknowledgement along with Reason for the

Rejection

▪ No further validation will be done for the Message

▪ Errors in Basic Header Block is considered as Protocol Error & will

not even be Negatively acknowledged
▪ NAK’d SWIFT Messages are charged twice by SWIFT

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SWIFT – Storage, Retrieval & Broadcast

▪ Storage & Retrieval

 Messages are stored for 124 Days
 Accepted Messages
 Rejected Messages
 Retrieval for both Input & Output Message
▪ Broadcast
 Sent by SWIFT on its own to all FIN Users or select group of Users
 User can also request for Broadcast Message
 (Eg: Merger of Banks. Change of Nostro Correspondent, Activation /
Deactivation of BIC, Change of Address etc)
 Category 0 Messages are used for Broadcast
 Broadcast Message can be up to 1200 Characters

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SWIFT – Test & Training Mode

▪ Every User is provided with one T & T Address

▪ Eight Character of the Address will be 0 (Zero)
▪ Simulating full functions of the LIVE FIN Service
▪ Allows user to test changes before LIVE Implementation
▪ SWIFT Validation is similar to LIVE FIN Message with some
restriction
▪ Message available for retrieval for FOUR Days only
▪ Broadcast Messages are Validated but not delivered
▪ T & T can be used in two ways:
 LTM – Local Test Mode
 FFM – Full Function Mode
▪ Under LTM all message types can be sent or received
▪ Under FFM Message is exchanged with Counter Parties
▪ Messaging Standards Supported
 Current Standard & Future Standard (during Test Period)

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SWIFT – FIN Copy

▪ Used for Monitoring and Control purposes

▪ Copy the information to third party automatically
▪ To support Market Infrastructure Initiatives
▪ RTGS, Netting & CLS uses this facility
▪ Two types of FIN Copy available – T Copy & Y Copy
▪ T Copy:
 Central Institution receives the FIN Message for information only
▪ Y Copy:
 Central Institution Intercepts the FIN Message
 Authorize or Reject the Delivery to the Receiver
 SWIFT intercept & hold the message till it is authorized
▪ Central Institution can be Bank own Institution or National Central Bank
▪ Full or Partial message is forwarded to Central Institution
▪ FIN Copy services is conveyed through Block 3

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SWIFT – FINInform

▪ Similar to T Copy mode of FIN Copy

▪ FINInform Service Administrator - Bank Head Quarters
▪ FINInform User – Branches or Subsidiaries
▪ FINInform Service Administrator
 Receives copy of FIN Messages exchanged by FINInform User
 Specifies the User, Message Type, Destination for the service
 Copy of the Message is sent to Administrator
▪ Useful for
 MIS Reporting
 Funds Management
 Risk Management

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SWIFT & ISO Standards

▪ ISO standards that are used in SWIFT messages

 ISO 3166 - Country code
 ISO 4217 - Currency code
 ISO 6166 – ISIN code
 ISO 8601 - Date and time format
 ISO 9362 - BIC code
 ISO 10383 - MIC code
 ISO 10962 - CFI code
 ISO 13616 – IBAN code
 ISO 16732 - IBEI code

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SWIFT – FIN Standard Release
▪ Why?:
 To Maintain the functionality of Existing Standards
 To Bring Standards in line with Business Changes
 To Correct Technical Issues
 Compliance to current regulatory and market needs
 Availability of new functionalities
▪ How?
 CR submitted by SWIFT User Group / National Market Practice Group
 CR Received 16 Months prior to Standard Release are Analyzed by SWIFT
 Maintenance Working Group (Business Domain Experts) discuss & Approve
 MWG agreed changes are subject to Country Vote
 SWIFT Board Standards Committee approve the Country Vote Results
 Publishes the Standard Release
▪ What is new in SR 2008?
 Securities market harmonization efforts (Euroclear, Giovannini Barrier 1, SMPG...).
 Implementation of new UCP600 rules in category 7
 changes following matching of new category 6 and 3 messages in Accord
 MT messages adaptation to enable coexistence with MXs
▪ WHEN?
 SR 2008 Implementation - 15 Nov 2008.

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SWIFTNet
▪ SWIFTNet InterAct
▪ SWIFTNet FileAct
▪ SWIFTNet Browse
▪ SWIFTNet Phase 2 Migration

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SWIFTNet InterAct

▪ Features
▪ Secure Interactive Message Exchange to
Closed User Group
Request for Statement
of Accounts * ▪ Access Authorization
▪ Role based access
▪ Data Authentication & Encryption
▪ Non Repudiation of Emission &
InterAct Reception Request
▪ Single Window Service
SIPN ▪ Time Stamping
▪ Message Routing
▪ Support:
4 Statement of Accounts ▪ Real-time Query & Response
▪ Real-time Messaging
▪ Store & Forward Messaging

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SWIFTNet FileAct

▪ Features
▪ Interactive Communication Service
▪ Exchange of any kind of File
Multiple Payment
Transactions * ▪
▪
Interactive Monitoring
Non Repudiation of Emission
▪ Global Coverage through Single Window
FileAct ▪ Maximum Individual File Size – 250 mb
▪ Concurrent File Transfer
SIPN ▪ Automated Solution for
 File Transfer Integration
 File Transfer Agent

4 Executed Transaction
Report
▪ Suitable for
▪ Batch Transfer of Structured Messages
▪ Large Reports
▪ Images, Text, Documents etc.

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SWIFTNet Browse

▪ Features

Service Provider : ▪ View Data from a Remote Source

▪ Secured & Reliable Environment
▪ No need to install service specific client
software
▪ User to SWIFT
 Encryption
Browse SWIFT
 Integrity
 Authentication
▪ Browsing combined with
 InterAct
 FileAct

: SWIFT User

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SWIFTNet Phase 2 Migration
▪ Single Security Model to access all SWIFTNet
Services
▪ Public Key Infrastructure (PKI) Security
Migration
▪ Replacing Bilateral Key Exchange (BKE) with
Relationship Management Application
(RMA)
▪ Secured Card Reader (SCR) will be replaced
by Hardware Security Model (HSM)
▪ Independent of Back Office functions
▪ Benefits
▪ No BKE Keys to Exchange or Renew
▪ Changes to Correspondent Authorization –
only when business relationship changes
▪ Relationship defined at BIC 8 Level
▪ Relationship applicable to all SWIFTNet
Solutions
▪ Control over exchange of Authenticated
Traffic
▪ What will Change?
▪ Upgrade to User Interfaces and adoption of
RMA Application
▪ Access to FIN using Digital Signature
▪ User to User Authentication using Digital
Signature instead of Message
Authentication Code (MAC)
▪ SCR & Integrated Circuit Card (ICC) will be
replaced by HSM
▪ Only one Authorization at a time
▪ Implementation Window
▪ Phased Migration
▪ Window spread between 2007 – 2008
▪ User to migrate without the need to know
the migration status of their
correspondents
▪ BKE & RMA Co-exists till Cut-over
▪ FIN Message will be delivered with the
Security Data relevant to the Status of
Receiver
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