Tuesday, January 27, 2015

Russia's Alternative to SWIFT Would Cause Big Problems for the West - Russia Insider

The Inevitable Blowback of Russia’s New Interbank System

Iran isn’t in a position to challenge the United States. But when the U.S.’ most loyal ally in Europe, the United Kingdom, called for Russian banks to be ejected from SWIFT during the height of the Ukraine crisis, the two Anglo countries met their match.

A few weeks ago, Russia announced its intention to launch an alternative to SWIFT by May 2015. Russia’s new interbank system would dominate transactions in rubles, with conversion to and from U.S. dollars at either end.

For example, an Iranian government agency could use dollars to buy rubles, transmit them via the Russian system, and have them paid to a supplier in Europe who then converted them back to dollars.

Short of hacking into the Russian system, the U.S. would have no way of knowing who was paying what to whom or for what reason.

Opportunity or Curse?

It’s not hard to imagine the opportunities this could present — and I’m dead sure the IRS and other U.S. agencies are doing so right now. One relates to “terrorist” financing and sanctions-evasion. But there are others.

For example, “U.S. persons” could send funds to a FATCA-compliant bank overseas, withdraw them, convert into rubles, and have them sent across the Russian interbank system to a non-compliant bank. They would then be outside the international tax reporting system the U.S. is trying so desperately to construct.

Complete story at - Russia's Alternative to SWIFT Would Cause Big Problems for the West - Russia Insider

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