The Society for Worldwide Interbank Financial Telecommunications (SWIFT) system is behind most international cash and security transfers. SWIFT is a vast messaging network used by banks and other financial institutions to send and receive information quickly, accurately, and securely, such as money transfer instructions.

How it works?

A unique code that has either eight characters or 11 characters is assigned to each financial organisation by SWIFT. The bank identifier code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code are interchangeably referred to as the code. Let’s look at the Italian bank, UniCredit Banca, headquartered in Milan, to understand how the code is assigned. It features the UNCRITMM 8-character SWIFT code.

• First four characters: the institute code (UNCR for UniCredit Banca)
• Next two characters: the country code (IT for the country Italy)
• Next two characters: the location/city code (MM for Milan)
• Last three characters: optional, but organizations use it to assign codes to individual branches.

Suppose a customer in New York from a Bank of America (BAC) branch wants to send money to his friend who is banking in Venice at the UniCredit Banca branch. With his friend’s account number and UniCredit Banca ‘s unique SWIFT code for its Venice branch, the New York customer can walk into his Bank of America branch.

Bank of America will send a SWIFT payment transfer message over the secure SWIFT network to the UniCredit Banca branch. Once the SWIFT message about the incoming payment is received by Unicredit Banca, it clears and credits the money to the Italian friend’s account.

Keep in mind, as strong as SWIFT is, that it is only a messaging system. There are no funds or securities held by SWIFT, nor does it manage customer accounts.