Article regarding Corporate SWIFT Access October 2006

1. W I T H A G R O W I N G N U M B E R O F C O R P O R AT E U S E R S ,
T H E “ I ” I N S W I F T C O U L D S O O N S TA N D F O R S O M E T H I N G
ELSE – INTEROPERABILITY
Welcome to planet SWIFT
Dirk Braun*
How can you reach virtually all the major (TMS), as well as their accounts receivable
banks throughout the world via a highly and accounts payable systems, which are
secure, highly available platform? SWIFT of connected to SWIFTNet via middleware.
course SWIFT stands for the Society for Middleware handles tasks such as the
Worldwide Interbank Financial routing of messages - it determines which
Telecommunication. Dresdner Bank was one internal or external recipient/application
of its founder members in the 1970s, when should receive incoming and outgoing
SWIFT replaced the telex-based interbank messages. Another function of middleware
communications method with what was is to reconcile various software and/or
then a modern electronic process. Taking hardware platforms).
account of the increasing demands of users,
SWIFT has since undergone a few These parameters are essential to the notion
modifications. In 2004, the backbone of real STP or end-to-end STP, which
system was migrated from X.25 to IP describes the automated processing of data
technology, which saw member banks along the entire supply chain (of one or
migrate to SWIFTNet. more companies). This supply chain is
accompanied by the financial supply chain,
With the increased opportunities emerging which integrates payment flows associated
from this “private internet”, participation in with the various process steps. Companies
this telecommunications model is becoming should design their financial supply chains
increasingly attractive to corporates. to be as efficient as possible with as little
Communications here are, in theory, not manual input and disruption as possible.
limited to certain types of transaction and This goal can be achieved if the business
almost all (banking) services imaginable can applications used are integrated as
be processed. described above and are interoperable.
SWIFT Connectivity is of great significance
Participating companies implementing here. Case studies regarding the
SWIFTNet generally experience major implementation of SWIFT by corporates,
improvements in process organisation suggest that ROI is between 400% and
thanks to the flexibility of the required IT 600% in just five years.
infrastructure. This also allows for a higher
degree of straight-through processing (STP) - THE LATEST MODEL
less manual input and disruption. Since 1998, connection to SWIFT has been
Corporates connected to SWIFTNet can, for possible using the treasury counterparty
example, communicate directly with their model. With this type of access, there are
banks from their business applications, ERP no limitations for the communications
systems and treasury management systems partner – all SWIFT users can be reached
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2. THE FINANCIAL-i GUIDE TO SWIFT SOLUTIONS
directly. However, there is a limitation to the WHY SHOULD A
confirmation of FX deals message category.
CORPORATE JOIN SWIFT?
In 2001, SWIFT created another access
option for corporates: Member ■ Highly secure and available
Administered Closed User Groups (MA- communications network
CUGs). The MA-CUG model functions in the (99.999%)
exact opposite way to the treasury
counterparty model (no restrictions in ■ All main banks worldwide accessible
services but direct communication is only through one system
possible with one SWIFT member). In
principle, all SWIFT users (about 7,900) are ■ All types of banking transactions
reachable for corporates using the MA-CUG can be integrated
model – via the SWIFT member who
manages the MA-CUG for the respective ■ End-to-end straight through
corporate. processing through integration into
available business applications
Market developments in the past few years
have shown that corporates generally ■ Improved business decision-making
belong to several MA-CUGs so they can ability through real-time
communicate directly with their strategic communications (e.g. for liquidity
banking partners. The flexible and highly management)
secure deployment options for SWIFTNet
depend, however, on a few complex ■ Reduction in total cost of ownership
processes in the implementation phase, (TCO) as proprietary, heterogeneous
which must be completed in the MA-CUG banking systems are dispensed with
model for every partner with whom direct
communications are necessary. For example, ■ Audits simpler thanks to
contracts and tests must be agreed and minimisation of operational risks
implemented with all MA-CUG banks (important e.g. for Basel II and the
individually. Sarbanes Oxley Act)
To minimise these initial hurdles, SWIFT set ■ Future security due to high
up a working group, the Corporate Access scalability
Group (CAG). The results from this project
were approved by the SWIFT Board on 14 activity. The MM CUG model is scheduled to
July 2006. The working title of the new be officially introduced at the SIBOS SWIFT
access model is MM CUG (many-to-many conference (9 – 13 October 2006) and will
closed user group). The idea here is to only be available from 1 January 2007 as an
to process the initial “SWIFT joining” once alternative access method to SWIFTNet.
for the corporate – directly with SWIFT. To Dresdner Bank will support this service and
satisfy the high demands of the user intends to take an active role in its market
community in terms of security, availability, development.
and integrity of SWIFTNet in the new access
model, listing on one of the stock CHALLENGES TO IMPLEMENTATION
exchanges of the FATF countries is a The integration of a SWIFT connection for
prerequisite for participation. corporates is a significant undertaking. In
our experience, it is not the implementation
The countries involved in the Financial that absorbs resources, but defining and
Action Task Force on Money Laundering are establishing the content and processes. The
committed to the fight against money main challenges of such a project are
laundering and the financing of terrorist outlined in the following checklist:
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3. Scope FATF MEMBERS
■ Which business units will use the SWIFT
connection? ■ Argentina
■ Australia
■ Which banks will be contacted via ■ Austria
SWIFT? ■ Belgium
■ Brazil
■ Which transactions will be processed ■ Canada
through SWIFTNet? ■ Denmark
■ Finland
■ Which software will be used to process ■ France
these transactions in-house? ■ Germany
■ Greece
Infrastructure ■ Hong Kong
■ How can interoperability of the systems ■ China
and SWIFTNet be achieved? ■ Iceland
■ Ireland
■ Which hardware, software and ■ Italy
communications systems are currently ■ Japan
used? ■ Luxembourg
■ Mexico
■ Is outsourcing of the SWIFT technology a ■ Netherlands
possibility (make or buy)? ■ New Zealand
■ Norway
■ Service-specific features (e.g. payment ■ Portugal
transactions and cash management) ■ Russian Federation
■ Singapore
■ Which file formats do the current ■ South Africa
business applications produce? ■ Spain
■ Sweden
■ Which file formats can be processed by ■ Switzerland
the banks? ■ Turkey
■ United Kingdom
■ Which approval/authentication processes ■ United States
should be used?
Some of the main providers of specialist
OUTLOOK software and treasury management systems
On 1 January, 2008, the integrated have announced their intention to integrate
European payment transactions market will SWIFT connectivity into their products. The
become a reality (SEPA – Single Euro market leader in ERP systems, SAP, will
Payments Area). With this, comes the connect the first pilot customers from its own
introduction of a standardised legal software with SWIFTNet as early as 2006.
framework for the processing of payments Dresdner Bank expects this market trend to
in Europe and a new XML-based data result in a significant increase in data volume
format for processing payment transactions. being transferred by corporates via SWIFTNet.
Dresdner Bank anticipates that an If corporate SWIFT access strengthens, the
increasing trend will emerge of centralising “I” in SWIFT could well change.
cashflow, banking and account structures “Interoperability” is just around the corner…
along with the associated processes, such
as those in the domain of banking *Dirk Braun is assistant vice-president of
communications. Dresdner Bank. www.dresdner-bank.com
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