SWIFT/BIC code: what is it, and what is it for?

Introduction

The SWIFT/BIC code is an alphanumeric code that has 8 or 11 digits, and it identifies the receiving bank when an international transfer is made. SWIFT (Society for Worldwide Interbank Financial Telecommunication) and BIC (Bank Identifier Code) have the same meaning. They are two ways of referring to the same term and can be used interchangeably.

Composition of the SWIFT/BIC

This code always consists of 8 or 11 characters:

• The first four correspond to the code of the destination financial institution or bank. In the case of CaixaBank, it is CAIX.
• The next two correspond to the country code. In Spain, it's ES.
• The next two correspond to the location of said financial institution. In the case of CaixaBank, it would be Barcelona (BB).
• The next three are optional, although they are used in Spain. They correspond to the branch code. Let's say it's 001.

Therefore, a complete example of a BIC would be: CAIX ES BB XXX.

History of the SWIFT/BIC code

The SWIFT company was founded in Belgium in 1973, with the aim of facilitating payments and communication between various global banks. Two years later, in 1975, the system of the same name was created. It is currently known as ISO 9362, as the international message payment system. Its operations centres are currently located in the United States, the Netherlands and Switzerland.

Most countries in the world use this system, especially in the West; however, there are some alternatives, such as the Chinese CIPS, the Russian SPFS or the BRICS (Brazil, Russia, India, China and South Africa). In the case of Russia, when Vladimir Putin decided to invade Ukraine, the West responded with coordinated actions. Both the EU and the USA blocked access by the main Russian banks to this international system. In fact, this was one of the first measures taken by Western leaders.

SWIFT/BIC applications

As you can imagine, this process involves much more than the eleven letters in the code. Its infrastructure includes a computer system that works through encrypted messages between banks. In practice, the SWIFT/BIC code is an encrypted message that provides the data of each transaction (expenses, currency, dates in question) and constitutes irrevocable proof of the transaction. It thus provides legal certainty to the receiver. This reduces the risk of fraud, transactions with black money or different types of scams.

The products that use SWIFT are quite varied, although there are different sections (security, cash and derivatives, money handling and business services). Without going into many technical details, it involves a highly complex infrastructure that regulates a large part of money flows worldwide.

Its use as a pressure tactic: geopolitics and international sanctions

SWIFT declares itself neutral, but since it is under Belgian sovereignty, it applies the sanctions that Brussels and the EU decide. It is also used in the West as a pressure tactic.

• Russia and Belarus 2022: When Vladimir Putin decided to invade Ukraine in February 2022, the West responded with coordinated actions, leaving the main banks in Moscow and Minsk disconnected from this system. In the case of Belarus, Lukashenko was also considered an accomplice to the Kremlin's actions in Ukraine. While not officially intervening in the conflict, his support is explicit.

The situation was not new. In 2014, when Russia occupied Crimea, SWIFT ruled out disconnecting Moscow from this system. Russia's answer was equally swift in coming: it created the SPFS system as a preventive measure in case it was left out. Currently, with much of Russia's economy disconnected from SWIFT, SPFS is the system used.

• Iran 2012: the nuclear programme implemented by Tehran provoked an immediate response by the USA and the West. In the end, the country was kicked out of the system, a situation that persists to this day.

In response to this type of Western sanction, some countries are already developing their own alternatives to this system. The most striking case is Russia's SPFS. More economically important is its Chinese alternative (CIPS), which is already in place in over 100 countries throughout the world. Given all the geopolitical tension, it's hard to predict what the next few years hold.

Now you know more about the SWIFT/BIC code, how it works and its economic and geopolitical applications. Keep checking back with CaixaBank and stay informed about bank accounts.