The Society for Interbank Financial Telecommunication Company - Term Paper Example

The Society for Worldwide Interbank Financial Telecommunication Company Introduction The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a telecommunications company that was founded in the year 1973. The SWIFT Company deals with financial telecommunications products and has got more than 2000 employees who help with the running of this company. The company’s headquarters are in Brussels, Belgium. The SWIFT Company has established itself as one of the leading companies in the worldwide financial messaging network (Al-Suwaid, 45). Here, the company does play the role of exchanging messages between banks as well as other financial institutions. The company has also established itself as a software marketer. A lot of this software marketed by the company is usually for use in the SWIFTNet Network. The software is also used in the ISO 9362 bank identifiers codes. These codes are what are popularly known as the SWIFT codes (Al-Suwaid, 54). The SWIFT network has been very beneficial to the international banking network. This network has enabled the smooth and swift conduct of financial transactions all over the world. Banks are able to connect with each other over this network and the customers have also found it easy to conduct their transactions from anywhere they are in the world. A large number of the international interbank messages are usually conducted over this SWIFT network. The SWIFT network has linked together more that 10,000 financial institutions all over the world. These institutions are found in more than 209 countries and territories (Karwan, 44). On average, a total of more than 15 million messages are exchanges over this SWIFT network by the banking institutions. This high number of messages has been as a result of the secure network that the SWIFT Company has. The company has earned the trust of its clients and consumers and it is because of this trust in the way that they handle their financial management that the company continues to grow bigger every day. Financial Management of the SWIFT Company In handling the financial transactions of these banks, the SWIFT Company does not necessarily facilitate the transfer of the funds. It only plays the role of sending the payment orders. These orders have got to be settled though the correspondent accounts that have been set up by the different institutions to communicate with one another (Effros, 11). In order to exchange banking transactions, it is a requirement that each one of the financial institutions has got to have a banking relationship with the other institution that it wants to conduct transactions with. This relationship can either be in the form of a bank relationship or an affiliation of the institution with the other institution in order to facilitate the conduction of the business. The SWIFT Company is under the Belgian law (Effros, 13). The member financial institutions own this company and they conduct their business according to the Belgian law. The company has got offices all over the world and the headquarters are in the Belgium near Brussels. When the SWIFT Company started conducting its business, there was the establishment of the common standards in relation financial transactions. There was also the establishment of a shared data processing system which was accompanied by the setting up of a worldwide communications network. This network was designed by Logica. The main purpose for establishing this network and the common standards was in order to allow for the conduct of the financial transactions all over the world smoothly. The SWIFT Company thus set worldwide standards for financial transactions and it became the leading company in the industry standard for syntax. When it came to facilitating sending of financial messages, this company was the leading provider of the service (Effros, 15). What made the SWIFT Company very popular worldwide was the fact that the messages that had been formatted according to the SWIFT standards were very easy to decode. These messages could be read and processed by a lot of the financial processing systems. It did not matter whether the message had been sent over the SWIFT network or not. The SWIFT network established international standards which could be applied all over the world. The message format and content used in this network is standard and thus makes financial communication all over the world very easy. The Swift Company has established the following ISO standards: ISO 9362:1994 Banking. Banking telecommunication messages. Bank identifier codes (Stewart, 1). ISO 10383:2003 Securities and related financial instruments. Codes for exchanges and market identification (MIC). ISO 13616:2003 IBAN Registry (Stewart, 1). ISO 15022:1999 Securities—Scheme for messages (Data Field Dictionary) (replaces ISO 7775) (Stewart, 1). ISO 20022-1:2004 and ISO 20022-2:2007 Financial services—Universal Financial Industry message scheme (Stewart, 1). Albania has implemented or rather complied with the IBAN (ISO 13616) format. This is represented by the following table. Data Element Example Name of Country Albania Country code relating to ISO 3166 AL Domestic account number 0000000235698741 BBAN BBAN Structure 8!n16!c BBAN Length 24!c Bank Identifier position within the BBAN Bank Identifier 1-3, Branch Identifier:4-7, Check Digit 8 Bank Identifier length 8!n Bank Identifier example 212-1100-9 BBAN Example 212110090000000235698741 IBAN IBAN Structure AL2!n8!n16!c IBAN Length 28!c IBAN electronic format example AL47212110090000000235698741 IBAN print format example AL47 2121 1009 0000 0002 3569 8741 SEPA Country No Contact details Contact details Elivar GOLEMI Payments Systems BANK OF ALBANIA Banka E Shqiperise Sheshi Skenderbej, nr 1 1001 TIRANA ALBANIA Tel: 355 2222152 ext 3132 Fax: 355 2223558 Email: egolemi@bankofalbania.org (Swift.com, 1) Operation Centers The SWIFT Company has got a very secure messaging network. This network is run from two data centers. The first data center is in the United States. The other data center is in Netherlands. These two centers are well interlinked to each other. They share information in real time. Thus, the SWIFT Company has ensured that there is efficiency in the transmission of messages such that if there is a failure in one center, the other one can take over the transmission very easily. In order to make its financial management process even better, the SWIFT Company has opened a third data center. This one has been opened in Switzerland (proz.com, 1). The center started operation in the year 2009. Opening up this center was very advantageous to the European SWIFT members. Their messages were no longer mirrored to the United States data canter but were transmitted by this data center. The messaging service by the SWIFT Company was thus partitioned into two zones. There was the European messaging zone as the first zone. The Trans-Atlantic messaging zone was the second zone (Al-Suwaid, 56). The Netherlands and part of the Switzerland operating center have the obligation of storing the messages from the European Zone. On the other hand, messages from the Trans-Atlantic Zone are stored in the United States operating center as well as part of the Switzerland operating center. These centers are separated from the European Zone messages (Proz.com, 1). For the member countries of the SWIFT network that are outside Europe, they were allocated to use messaging service in the Trans-Atlantic Zone. However, there was the option given to these member countries to choose where they would wish their messages to be stored. If they wanted them to be stored in the European Zone, they were free to select this option and do so. Having these operation centers in the different zones has made it very easy and convenient for the SWIFT Company network to be efficient in the transmission of messages across the world. Their management of financial transactions has become the best in the entire world (Proz.com, 1). The SWIFTNet Network As a financial management institution, the SWIFT Company had got to setup one of the best networks over which they would conduct their business with ease. They had to have a network that did not have hitches or failures every now and then. This was the primary reason as to why the SWIFT Company has received a lot of positive feedback from customers and clients all over the world. Their trust has been earned simply because of the manner through which they handle their financial transactions with easy and effectiveness. The SWIFT network is one of the best financial networks that there is in the entire world. It is very fast, accessible and efficient in making sure that the customers get their transactions done at the right time without delays. However, setting up this network was not an easy task. A lot of strategizing had to go into it. In order to make its IP network infrastructure to be more effective, SWIFT moved from 2001 to 2005. It moved to the SWIFTNet IP network (ISACA, 1). Here, there was the replacement of the X.25 infrastructure that had been existent before. Thus, in order to make this work, there needed to be new protocols that were to be put in place. These protocols were to help with the provision of messaging services that were very efficient. This was to be made possible by using both the existing and new message standards. The XML technology was used by the SWIFT Company to make these changes. This technology was the best in developing the new protocols. The XML technology was to provide a wrapper that covered all the messages (SWIFT.com, 12). Whether the messages were legacy or contemporary, this technology was to cover all of them. The protocol for the communication was thus broken down (ISACA, 1). The following partitions were made: 1. InterAct SWIFTNet InterAct Realtime. SWIFTNet InterAct Store and Forward. 2. FileAct SWIFTNet FileAct RealTime SWIFTNet FileAct Store and Frward 3. Browse SWIFTNet Browse (ISACA, 1). These partitions made the SWIFT network to become more efficient in the handling of their financial management and transactions. Thus, there was a better reception from the customers as they were satisfied with the services that they were receiving from this company. Organization of the SWIFTNetwork The SWIFT Company is very well organized in the manner through which it does handle its architecture or organization. The company has been very well organized so as to ensure efficient and effective service to its customers all over the world. The SWIFT Company has ensured that it is in the frontline in the provision of a centralized store-and-forward mechanism (FFIEC, 1). This mechanism involves some bit of transaction management as well. Thus, in this mechanism, in order for bank A to be able to send a message to bank B and at the same time obtain authorization from another financial institution C, there are procedures that will have to be followed. Bank A has got to format the messages that it is sending as per the standards set. It will then securely send this message to SWIFT. What SWIFT does is that, it will guarantee the security and reliability of the message delivery to bank B. this will be delivered following the appropriate action by the financial institution C. SWIFT has earned the trust of the customers in its guarantee simply because of the high redundancy it has got when it comes to its people, the software used in transmission and the hardware used too. SWIFT Phase 2 The SWIFT network is ever looking for ways through which it can make its services much better. Thus, it is always migrating to a new infrastructure if the company management feels that there is the need to do so to make the company more efficient. In the years 2007 and 2008, the entire SWIFT network witnessed a change in the network infrastructure. The SWIFT Company network decided to shift from the current infrastructure to an entirely new protocol. This new protocol was known as the SWIFT Phase 2 (FFIEC, 1). There was a difference between this new SWIFT Phase 2 and the previous infrastructure that existed. The main difference that made the management decide to switch to this network was the fact that this new protocol, Phase 2, does not require the banks that use the network to use the bilateral key exchange system. Instead, the new protocol requires these banks to use the relationship management application network system (FFIEC, 1). The SWIFT's public information database shed more light about this new switch of protocols. The relationship management application software was considered to be very effective by the SWIFT Company as compared to the previous protocol. One of the main reasons behind this was how easy it was to keep the software up-to-date. Updating the software was a lot simpler as compared to the bilateral key exchange software. However, the move from the previous protocol to this protocol was not an easy one. This meant that all the thousands of banks that belonged to the SWIFT network all over the world had got to update their international payments systems. This updated was to facilitate their compliance with the new standards. The relationship management application protocol managed to finally replace the bilateral key exchange system in January 2009 (Rodwell, 1). The movement of the SWIFT network from the bilateral key exchange software to the relationship management application software was all part of the strategies by the SWIFT network to make its services more efficient to the customers all over the world. This company is always looking for ways through which it can improve its services and make the customers satisfied and happy. By always making sure that their systems are up to date, the company continually gains the trust of the consumers. This way, their financial management network continues to grow with each passing day. This company keeps on getting bigger and better and it gains more members each passing year (Rodwell, 1). The Interfaces In the financial world, there are a number of definitions for SWIFT. SWIFT is known for being one of the most secure networks over which messages can be transmitted form one financial institution to the next. SWIFT has also been defined as being a compilation of syntax standards for financial messages. Here, it is responsible for the transmission of messages over the SWIFTNet as well as other networks (SWIFT.com, 1). The third definition of SWIFT has describes it as being a stack of connection software and services. Here, the SWIFT network plays the role of allowing the transmission of messages by the financial institutions over the SWIFTNetwork. In this case, the SWIFT network provides s number of solutions to its members. It links the clients from the different financial institutions with each other and enables them to be able to conduct their transactions with ease (SWIFT.com, 1). The SWIFT Services The SWIFT Company does provide a number of services over its network. These services are what enable the financial transactions to be conducted by the customers using financial institutions on the SWIFT network. In the financial market place, the services provided by the SWIFT network do fall under four key areas. These four areas are the securities, the treasury & derivatives, the trade services and the payments & cash management (Christoph, 18). Under the securities, there is the SWIFTNet FIX (obsolete), the SWIFTNet Data Distribution, the SWIFTNet Funds and the SWIFTNet Accord for Securities (Christoph, 18). Under the treasury and derivatives areas, there is the SWIFTNet Accord for Treasury, the SWIFTNet Affirmations and the SWIFTNet CLS Third Party Service (Christoph, 19). The cash management area has got the SWIFTNet Bulk Payments, the SWIFTNet Cash Reporting and the SWIFTNet Exceptions and Investigations. Finally, the trade services area has got the SWIFTNet trade services utility (Christoph, 2011). It is by partitioning itself into these networks that the swift company has actually been able to make its financial management much simpler. The company continues to give its customers and member countries more reasons as to why they should stick to it as their financial transactions company. The efficient way through which the company handles its financial management makes it more the leading financial management company in the entire world. Conclusion From the above discussion, we have seen that the SWIFT Company network is among the leading companies in the entire world that engages itself in the financial management service industry. This is one area that requires a lot of efficiency and effectiveness since the company is dealing with the client’s finances. In order to earn the trust of the clients, the SWIFT Company has had to provide them with the most secure network over which they can transmit their financial messages from one institution to another with easy and discreet. This is why the SWIFT Company has been on the frontline when it comes to updating their software and keeping them up to the current standards. The SWIFT Company network has been very effective in offering financial services to its clients and customer. The company has earned their trust and guarantee over the years and it is for this reason that it is the number one financial messages transmitter in the entire world. Works Cited Al-Suwaid, Mohammed. Finance of International trade in the Gulf. New York: McGraw Hill, 1994. Pp. 45-67. Christoph, Schult. The SWIFT Data Agreement. New York: SAGE, 2011. Pp. 12-34. Effros, Robert. Current Legal Issues Affecting Central banks. New York: McGrawhill, 1998. Pp. 11-19. FFIEC. “SWIFTNetwork and Transactions”. 2011. Web. 19 March 2012 from < http://ithandbook.ffiec.gov/it-booklets/wholesale-payment-systems/interbank-payment-and-messaging-systems/other-clearinghouse,-settlement,-and-messaging-systems/society-for-worldwide-interbank-financial-telecommunication-%28swift%29.aspx>. ISACA. “Case Study: Society for Worldwide Interbank Financial Telecommunication: The SWIFT Company Protocols”. 2010. Web. 19 March 2012 from < http://www.isaca.org/Knowledge-Center/cobit/Pages/Society-for-Worldwide-Interbank-Financial-Telecommunication-SWIFT-.aspx>. Karwan, Rosen. Global Information Systems and Technology: Focus on the SWIFT Company network. New York: SAGE, 1994. Pp. 44. Proz.com. “The Swift Codes”. 2002. Web. 19 March 2012 . Rodwell, Niol. “Society for Worldwide Interbank Financial Telecommunications- SWIFT.” 2011. Web. 19 March 2012 < http://www.investopedia.com/terms/s/swift.asp>. SWIFT.com. “The SWIFT Company: Transactions and Networks.” 2012. Web. 19 March 2012 < http://www.swift.com/about_swift/company_information/index.page>. Stewart, Strant.” The SWIFT and BIC codes.” 2010. Web. 19 March 2012 < http://www.theswiftcodes.com/>. Read More